Arco Platform Stock Story

ARCE

Stock

USD 15.72 0.39 2.42%

Macroaxis Story

Arco Platform is scheduled to announce its earnings today. Arco Platform Earnings Before Interest Taxes and Depreciation Amortization EBITDA are projected to increase significantly based on the last few years of reporting. The past year's Earnings Before Interest Taxes and Depreciation Amortization EBITDA were at 452.31 Million. The current year Enterprise Value is expected to grow to about 1.5 B, whereas Average Equity is forecasted to decline to about 1.9 B. While some of us are becoming more enthusiastic about consumer defensive space, let's digest Arco Platform in greater detail to make a better estimate of its debt utilization. We will evaluate why recent Arco Platform price moves suggest a bounce in June.

Published over two months ago

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Should I hold on to my Arco Platform (NASDAQ:ARCE) position?

Arco Platform currently holds 1.87 B in liabilities with Debt to Equity (D/E) ratio of 1.0, which is about average as compared to similar companies. The entity has a current ratio of 1.44, which is within standard range for the sector. Debt can assist Arco Platform until it has trouble settling it off, either with new capital or with free cash flow. So, Arco Platform's 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 Arco Platform sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Arco Platform to invest in growth at high rates of return. When we think about Arco Platform's use of debt, we should always consider it together with cash and equity.

Arco Platform financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Arco Platform, including all of Arco Platform'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 Arco Platform assets, the company is considered highly leveraged. Understanding the composition and structure of overall Arco Platform 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 Arco Platform Total Liabilities

Arco Platform liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Arco Platform 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 Arco Platform balance sheet include debt obligations and money owed to different Arco Platform vendors, workers, and loan providers. Below is the chart of Arco Platform short long-term liabilities accounts currently reported on its balance sheet.

You can use Arco Platform financial leverage analysis tool to get a better grip on understanding its financial position

How important is Arco Platform's Liquidity

Arco Platform financial leverage refers to using borrowed capital as a funding source to finance Arco Platform ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Arco Platform 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 Arco Platform's total debt and its cash.

Is Arco Platform valued correctly by the market?

The latest Arco Platform price dip could raise concerns from shareholders as the firm is trading at a share price of 15.64 on 166,203 in volume. The company directors and management were unable to exploit market volatilities in April. However, diversifying your overall positions with Arco Platform can protect your principal portfolio during market swings. The stock standard deviation of daily returns for 90 days investing horizon is currently 3.03. The above-average risk is mostly attributed to market volatility and speculations regarding some of the upcoming earning calls from Arco Platform partners.

Liabilities Breakdown

1.7 B

Current Liabilities

3.4 B

Long-Term Liabilities

	Deposit Liabilities	43.79 Million
	Total Liabilities	5.11 Billion
	Current Liabilities	1.73 Billion
	Long-Term Liabilities	3.38 Billion
	Tax Liabilities	47.82 Million

Over 3 percent surge for Arco Platform. What does it mean for shareholders?

The risk adjusted performance is down to -0.16 as of today. Arco Platform exhibits very low volatility with skewness of 0.15 and kurtosis of -0.45. However, we advise investors to further study Arco Platform technical indicators to make sure 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 Arco Platform's stock risk against market volatility during both bullying and bearish trends. The higher level of volatility that comes with bear markets can directly impact Arco Platform's 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.

Arco Platform Implied Volatility

Arco Platform's implied volatility exposes the market's sentiment of Arco Platform stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Arco Platform's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Arco Platform stock will not fluctuate a lot when Arco Platform's options are near their expiration.

Our Final Perspective on Arco Platform

Although some other entities in the education & training services industry are either recovering or due for a correction, Arco Platform may not be performing as strong as the other in terms of long-term growth potentials. The inconsistency in the assessment between current Arco Platform valuation and our trade advice on Arco Platform is due to the recent market swings and your selection of investing horizon. 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 Arco Platform.

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 Arco Platform. Please refer to our Terms of Use for any information regarding our disclosure principles.

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