Continue to hold Affiliated (NYSE:AMG) based on its current debt obligations?

AMG Stock

USD 177.04 0.25 0.14%

Macroaxis Story

Affiliated Managers is scheduled to announce its earnings tomorrow. Affiliated Managers Average Assets are projected to increase significantly based on the last few years of reporting. The past year's Average Assets were at 8.17 Billion. The current year Average Equity is expected to grow to about 3 B, whereas Earnings Before Interest Taxes and Depreciation Amortization EBITDA are forecasted to decline to about 909.9 M. As many of us are excited about financial services space, it is fair to digest Affiliated Managers Group as a unique alternative.

Published over three months ago

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The entity has 2.58 B in debt with debt to equity (D/E) ratio of 0.61, which is OK given its current industry classification. Debt can assist Affiliated Managers until it has trouble settling it off, either with new capital or with free cash flow. So, Affiliated Managers' shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Affiliated Managers sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Affiliated to invest in growth at high rates of return. When we think about Affiliated Managers' use of debt, we should always consider it together with cash and equity.

Continue to hold Affiliated (NYSE:AMG) based on its current debt obligations?

Affiliated Managers financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Affiliated Managers, including all of Affiliated Managers's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Affiliated Managers assets, the company is considered highly leveraged. Understanding the composition and structure of overall Affiliated Managers debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it.

Please read more on our technical analysis page.

Understanding Affiliated Total Liabilities

Affiliated Managers liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Affiliated Managers has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Affiliated Managers balance sheet include debt obligations and money owed to different Affiliated Managers vendors, workers, and loan providers. Below is the chart of Affiliated short long-term liabilities accounts currently reported on its balance sheet.

You can use Affiliated Managers Group financial leverage analysis tool to get a better grip on understanding its financial position

How important is Affiliated Managers's Liquidity

Affiliated Managers financial leverage refers to using borrowed capital as a funding source to finance Affiliated Managers Group ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Affiliated Managers financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between Affiliated Managers's total debt and its cash.

Breaking it down

The firm reported the last year's revenue of 2.46 B. Total Income to common stockholders was 561.8 M with profit before taxes, overhead, and interest of 1.37 B.

Asset Breakdown

6 B

Assets Non Current

4.8 B

Goodwill

1.5 B

Current Assets

	Total Assets	7.78 Billion
	Current Assets	1.45 Billion
	Assets Non Current	5.98 Billion
	Goodwill	4.78 Billion

Affiliated Managers implied volatility may change after the surge

Affiliated Managers latest maximum drawdown ascents over 8.22. Affiliated Managers Group exhibits very low volatility with skewness of 0.3 and kurtosis of -0.53. However, we advise investors to further study Affiliated Managers Group technical indicators to ensure that all market info is available and is reliable. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Affiliated Managers' stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Affiliated Managers' stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Although many of the other players in the asset management industry are either recovering or due for a correction, Affiliated Managers may not be performing as strong as the other in terms of long-term growth potentials. With an optimistic outlook on your 90 days horizon, it may be a good time to pick up new shares of Affiliated or increase your existing holdings in the Stock as it seems the potential growth has not yet been fully factored into the current price. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Affiliated Managers.

Editorial Staff

Ellen Johnson is a Member of Macroaxis Editorial Board. Ellen covers public companies in North America, focusing primarily on valuation and volatility. Six years of experience in predictive investment analytics and risk management. View Profile

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Ellen Johnson do not own shares of Affiliated Managers Group. Please refer to our Terms of Use for any information regarding our disclosure principles.

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