You think AZZ Incorporated (USA Stocks:AZZ) debt is an issue for investors?

Investors considering liquidating their holdings in AZZ Inc. (USA Stocks:AZZ) due to its current debt obligations should take a moment to explore the potential opportunities that this stock presents. Despite a total liability of 1.5B, the company maintains a total stockholder equity of 700.8M, suggesting a strong leverage position. Furthermore, the company's mean deviation of 1.63 and a Jensen Alpha of 0.0212 indicate a relatively stable performance, even in the face of market volatility. While the company's net interest income shows a loss of 107.1M, this is offset by its substantial inventory worth 117.7M, providing a cushion against potential market downturns.

Main Points

AZZ Incorporated carries a debt of 977.23 million, with a debt-to-equity ratio of 1.49. This is acceptable considering its industry classification. The company's Beta, a measure of market volatility, stands at 0.88, suggesting potential diversification benefits. AZZ Incorporated's returns are highly sensitive to market fluctuations, indicating that the company's performance tends to mirror the market's movements. However, AZZ Incorporated currently has a negative expected return of -0.034%. It is advisable to confirm the company's Sortino ratio and semi variance, and understand the relationship between the semi variance and the rate of daily change, before predicting if past performance will recur in the future.
Published over a week ago
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Reviewed by Michael Smolkin

In the financial landscape where risk and reward walk hand in hand, AZZ Inc., a prominent player in the Specialty Business Services industry, offers an intriguing case for investors. With total stockholder equity standing at $700.8M and a stable Ebitda of $316.6M, the company, listed on the NYSE, seems to have a robust financial standing. However, a deeper dive reveals a significant interest expense of $107.1M, casting a shadow over its financial health. Despite its forward dividend rate of 0.68 and a dividend yield of 0.89%, the company's debt obligations, indicated by its other current liabilities of $99.5M and accounts payable of $88M, raise concerns. The net working capital of $172.7M does provide some cushion, but the negative cash flow from financing activities at $3.4M signals potential liquidity issues. On the brighter side, AZZ Inc. holds $98.2M in long-term investments, $443.9M in intangible assets, and a goodwill of $705.5M, presenting potential opportunities for the company to leverage these assets to address its debt concerns. The company's stock is currently a subject of varying forecasts with a naive expected forecast value of $77.03, a potential downside price of $74.49, and a possible upside price of $79.58. While the analyst target price estimated value stands at $61.25, the valuation real value is calculated at $68.99, suggesting a disparity in the market's view of the company's true worth. In conclusion, while liquidating AZZ Inc. might seem a tempting move considering its current debt obligations, it may be worth exploring the potential opportunities that lie within its significant assets and the volatile forecasted stock price. After all, fortunes favor the brave, and strategic investment decisions often require a leap of faith. AZZ Incorporated is set to release its earnings report today. The company's Intangibles to Total Assets ratio has remained relatively stable over the past year. It's projected that the Net Debt to EBITDA ratio will increase to 3.23 in 2024, while the Market Cap is expected to slightly exceed $310.8 million in the same year. Despite some millennials' indifference towards the electrical equipment sector, AZZ Incorporated stands out as a unique investment option.
AZZ Incorporated financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of AZZ Incorporated, including all of AZZ Incorporated'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 AZZ Incorporated assets, the company is considered highly leveraged. Understanding the composition and structure of overall AZZ Incorporated 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 AZZ Total Debt

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

How important is AZZ Incorporated's Liquidity

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

Breaking down AZZ Incorporated Indicators

AZZ Incorporated reported the last year's revenue of 1.54 B. Total Income to common stockholders was 87.21 M with profit before taxes, overhead, and interest of 225.22 M.

Asset Breakdown

466.1 M
Intangible Assets
1.9 B
Non Current Assets Total
385.3 M
Total Current Assets
Net Tangible Assets
Total Assets2.31 Billion
Non Current Assets Total1.92 Billion
Other Current Assets8.2 Million
Total Current Assets385.35 Million
Non Currrent Assets Other8.86 Million
Intangible Assets466.13 Million
Other Assets1.43 Million
Net Tangible Assets209.34 Million
As Benjamin Franklin once said, beware of little expenses; a small leak will sink a great ship. This is particularly relevant when considering the financial position of AZZ Inc. (USA Stocks:AZZ).
The company's total debt stands at a significant $977.23M, with long-term debt accounting for $952.7M of this. Despite this, AZZ Inc. has managed to maintain a positive operating income of $221.6M and a net income of $87.21M. However, with a net interest income showing a loss of $107.1M, it's clear that the company's debt obligations are impacting its bottom line. Investors should carefully consider these factors before deciding to liquidate their holdings in AZZ Inc..

Another setback for AZZ Incorporated investors

AZZ Incorporated's stock is currently under potential threat, as suggested by the expected shortfall indicator falling to -1.95. This negative trend indicates a heightened risk of substantial losses, potentially leading to a decline in the stock's value. While some investors may anticipate a price surge following this downturn, caution is advised. Given the current market conditions and the company's performance, it's wise for investors to closely monitor AZZ's financial health before investing. AZZ Incorporated currently shows a below-average downside deviation, with an Information Ratio of 0.01 and Jensen Alpha of 0.02. Understanding market volatility trends can help investors time the market. Proper use of volatility indicators allows traders to measure AZZ Incorporated's stock risk against market volatility during both bullish and bearish trends. The increased volatility of bear markets can directly affect AZZ Incorporated's stock price, causing investor stress as share values drop. This often compels investors to rebalance their portfolios by purchasing different financial instruments as prices fall.

Our Final Takeaway

When is the right time to buy or sell AZZ Incorporated? Buying stocks such as AZZ Incorporated isn't very hard. However, what challenging for most investors is doing it at the right time. Proper market timing is something most people cannot do without sophisticated tools, which help to isolate the right opportunities, deliver winning trades and diversify portfolios on a daily basis.
While some 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 AZZ Incorporated.

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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 Rifka Kats do not own shares of AZZ Incorporated. Please refer to our Terms of Use for any information regarding our disclosure principles.

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