Thinking to exit AeroVironment (USA Stocks:AVAV) based on its current debt commitments?

AeroVironment is scheduled to announce its earnings today. AeroVironment Revenue to Assets are fairly stable at the moment as compared to the past year. AeroVironment reported Revenue to Assets of 0.49 in 2021. Total Assets Per Share is likely to climb to 39.53 in 2022, whereas Revenue Per Employee is likely to drop slightly above 353.7 K in 2022. While many traders are getting carried away by overanalyzing aerospace & defense space, it is reasonable to focus on AeroVironment as an investment alternative. We will evaluate why recent AeroVironment price moves suggest a bounce in January.
Published over a year ago
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Reviewed by Michael Smolkin

AeroVironment currently holds 177.84 M in liabilities with Debt to Equity (D/E) ratio of 0.35, which is about average as compared to similar companies.
The concept of asset utilization usually refers to the revenue earned for every dollar of assets a company currently reports. The latest return on assets of AeroVironment indicates not a very effective usage of assets in December.
AeroVironment financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of AeroVironment, including all of AeroVironment'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 AeroVironment assets, the company is considered highly leveraged. Understanding the composition and structure of overall AeroVironment 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 AeroVironment Total Liabilities

AeroVironment liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. AeroVironment 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 AeroVironment balance sheet include debt obligations and money owed to different AeroVironment vendors, workers, and loan providers. Below is the chart of AeroVironment short long-term liabilities accounts currently reported on its balance sheet.
You can use AeroVironment financial leverage analysis tool to get a better grip on understanding its financial position

How important is AeroVironment's Liquidity

AeroVironment financial leverage refers to using borrowed capital as a funding source to finance AeroVironment ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. AeroVironment 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. Financial leverage can amplify the potential profits to AeroVironment's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of AeroVironment's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the breakdown between AeroVironment's total debt and its cash.

Breaking down AeroVironment Indicators

This firm reported the previous year's revenue of 445.73 M. Net Loss for the year was (4.18 M) with profit before overhead, payroll, taxes, and interest of 141.24 M.

Asset Breakdown

588.3 M
Assets Non Current
353.4 M
Goodwill
342.2 M
Current Assets
Total Assets986.37 Million
Current Assets342.24 Million
Assets Non Current588.34 Million
Goodwill353.42 Million
Tax Assets9.05 Million

Is AeroVironment showing direct evidence of lower volatility?

Latest Treynor Ratio is up to 0.1. Price may fall again. AeroVironment currently demonstrates below-average downside deviation. It has Information Ratio of 0.01 and Jensen Alpha of -0.01. However, we advise investors to further question AeroVironment expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure AeroVironment's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact AeroVironment'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.

Our Takeaway on AeroVironment Investment

While some companies in the aerospace & defense industry are either recovering or due for a correction, AeroVironment may not be performing as strong as the other in terms of long-term growth potentials. While some sophisticated investors may not share our view we believe that the current risk-reward utility is not appealing enough to do any trading. 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 AeroVironment.

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Editorial Staff

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 Gabriel Shpitalnik do not own shares of AeroVironment. Please refer to our Terms of Use for any information regarding our disclosure principles.

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