Will current Arrowmark Financial (USA Stocks:BANX) debt levels change in two-three weeks?
By Vlad Skutelnik | Macroaxis Story |
In the world of finance, what goes up must be scrutinized. Arrowmark Financial Corp, operating in the bustling asset management sector within the financial services category, presents a mixed bag of indicators that could signal impending volatility. With a total liability of **$60.8M** and a net debt position of **$55.2M**, the company's leverage is a critical factor for investors to consider. Despite a robust EBIT of **$15.7M** and net income from continuing operations at $5.4M, the firm's end period cash flow stands at a modest $395.4K, with cash reserves slightly lower at $369.7K. The company's net interest income is healthy at $18.2M, which could cushion some of the volatility, but a change to account receivables with a loss of $754.1K and total cash from financing activities showing a drain of $15.5M may raise eyebrows. Arrowmark's valuation metrics show a naive expected forecast value of $17.27, significantly higher than the valuation real value pegged at $9.06, suggesting that the market may be pricing in future growth or recovery. However, with only one analyst issuing a buy rating and the highest estimated target price reaching $20.2M, the consensus points to optimism, albeit with caution. The forward dividend yield of 0.1051 indicates a commitment to returning value to shareholders, yet this must be weighed against the company's ability to maintain such payouts in the face of potential volatility. As the fiscal year-end approaches in December, investors should keep a close eye on Arrowmark's financial maneuvering, particularly how it manages its leverage and cash flows, to better understand the risks and opportunities that lie ahead. Arrowmark Financial Corp is set to release its earnings report today. As interest grows within the capital markets sector, it is an opportune time to delve deeper into Arrowmark Financial Corp's financials, with a particular focus on its debt utilization. We will conduct a thorough analysis to determine whether Arrowmark Financial's shares are fairly valued as we move into January.
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Reviewed by Michael Smolkin
Arrowmark Financial Corp, operating in the asset management industry, presents a nuanced picture for investors considering leverage. With a modest Jensen Alpha of 0.08, the stock shows a slight potential to outperform the risk-free rate, suggesting that it may offer some alpha to a diversified portfolio. However, the Sortino Ratio stands at 0.05, indicating that the stock does not provide a particularly attractive return on bad volatility, which could be a concern for risk-averse investors. Additionally, Arrowmark's net income from continuing operations is a solid $5.4M, which may provide some cushion against market fluctuations. Given these factors, investors should weigh the company's ability to leverage its income against the potential for increased volatility, as indicated by the modest Jensen Alpha and Sortino Ratio, before taking a position in Arrowmark Financial Corp.
Major Takeaways
Arrowmark Financial Corp currently has liabilities totaling $55.6 million. Its Debt to Equity (D/E) ratio stands at 0.35, which is considered average when compared to its industry peers. The asset utilization ratio, which measures the revenue generated for every dollar of assets reported by the company, is 3.77 percent for Arrowmark Financial. This indicates that the company earns $0.0377 for every dollar of assets it owns. An increase in the asset utilization ratio would imply that Arrowmark Financial Corp is becoming more efficient in using its assets for its daily operations.Arrowmark Financial financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Arrowmark Financial, including all of Arrowmark Financial'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 Arrowmark Financial assets, the company is considered highly leveraged. Understanding the composition and structure of overall Arrowmark Financial 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 Arrowmark Total Debt
Arrowmark Financial Corp liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Arrowmark Financial Corp 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 Arrowmark Financial balance sheet include debt obligations and money owed to different Arrowmark Financial vendors, workers, and loan providers. Below is the chart of Arrowmark main long-term debt accounts currently reported on its balance sheet. You can use Arrowmark Financial Corp financial leverage analysis tool to get a better grip on understanding its financial positionHow important is Arrowmark Financial's Liquidity
Arrowmark Financial financial leverage refers to using borrowed capital as a funding source to finance Arrowmark Financial Corp ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Arrowmark Financial 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 Arrowmark Financial'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 Arrowmark Financial'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 Arrowmark Financial's total debt and its cash.
Breaking it down a bit more
The modest gains experienced by current holders of Arrowmark Financial could raise concerns from investors as the firm is trading at a share price of 17.13 on very low momentum in volume. The company directors and management have been quite successful in maneuvering the stock at opportune times to take advantage of all market conditions in November. The stock standard deviation of daily returns for 90 days investing horizon is currently 1.31. The below-average Stock volatility is a good sign for longer-term investment options and for buy-and-hold investors. "Investing without research is like playing poker without looking at the cards." Arrowmark Financial Corp, trading on NASDAQ under the category of Financial Services, presents an intriguing picture for investors eyeing volatility.With an EBITDA of **$7.7 million** and an operating margin of a mere 0.77%, the company shows modest operational profitability. However, a kurtosis of 3.11 suggests a likelihood of experiencing outlier events, which could imply periods of unexpected volatility. The forward dividend yield of 10.51% might attract income investors, but the company's net income of $5.37 million against a market capitalization of **$121.77 million** indicates a tight squeeze on earnings. Additionally, the high probability of bankruptcy at 65.74% may raise red flags for risk-averse investors. Arrowmark Financial's leverage, with a total debt of $55.6 million and a debt to equity ratio of 0.35%, could exacerbate market movements, making the stock one to watch for those with an appetite for risk and a keen eye on market dynamics. .
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