You think Desktop Metal (NYSE:DM) debt is an issue for stakeholders?

The stock continues to experience a very aggressive trading activities. Desktop Metal Sales per Share is relatively stable at the moment as compared to the past year. The company's current value of Sales per Share is estimated at 0.63. Tangible Assets Book Value per Share is expected to hike to 1.92 this year, although the value of Earnings before Tax will most likely fall to (277.1 M). While some of us are becoming more enthusiastic about machinery space, let's summarize Desktop Metal in greater detail to make a better estimate of its debt utilization. We will check if the company can maintain a respectable level of debt while minimizing operating losses.
Published over a year ago
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Reviewed by Michael Smolkin

The company reports 19.98 M of total liabilities with total debt to equity ratio (D/E) of 0.02, which may suggest Desktop Metal is not taking enough advantage from financial leverage.
The asset utilization indicator refers to the revenue earned for every dollar of assets a company currently reports. Desktop Metal has an asset utilization ratio of 2.72 percent. This denotes that the company is making $0.0272 for each dollar of assets. An increasing asset utilization means that Desktop Metal is more efficient with each dollar of assets it utilizes for everyday operations.
Desktop Metal financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Desktop Metal, including all of Desktop Metal'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 Desktop Metal assets, the company is considered highly leveraged. Understanding the composition and structure of overall Desktop Metal 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.

Watch out for price decline

Please consider monitoring Desktop Metal on a daily basis if you are holding a position in it. Desktop Metal is trading at a penny-stock level, and the possibility of delisting is much higher compared to other stocks. However, just because the stock is trading under one dollar, does not mean it will be marked for deletion. Most exchanges require public instruments, such as Desktop Metal stock to be traded above the $1 level to remain listed. If Desktop Metal stock price falls below $1 for 30 consecutive trading days, the exchange can delist it. Once the company reaches this point, they will be sent an initial price violation notice directly from an exchange.

Understanding Desktop Total Liabilities

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

How important is Desktop Metal's Liquidity

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

Breaking it down

Desktop Metal generated the yearly revenue of 112.41 M. Annual Net Loss to common stockholders was (240.33 M) with gross profit of 20.49 M.

Asset Breakdown

1.1 B
Assets Non Current
972.4 M
Goodwill
397.7 M
Current Assets
Total Assets1.5 Billion
Current Assets397.73 Million
Assets Non Current1.06 Billion
Goodwill972.44 Million

Desktop Metal implied volatility may change after the hike

Standard deviation is down to 9.98. It may denote a possible volatility pull down. Desktop Metal is displaying above-average volatility over the selected time horizon. Investors should scrutinize Desktop Metal independently to ensure intended market timing strategies are aligned with expectations about Desktop Metal volatility. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Desktop Metal'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 Desktop Metal'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.

Desktop Metal Implied Volatility

Desktop Metal's implied volatility exposes the market's sentiment of Desktop Metal stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Desktop Metal'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 Desktop Metal stock will not fluctuate a lot when Desktop Metal's options are near their expiration.

While some other entities under the computer hardware industry are still a bit expensive, Desktop Metal may offer a potential longer-term growth to stakeholders. To sum up, as of the 10th of June 2022, we see that Desktop Metal hyperactively responds to market trends. The company is undervalued with very small probability of bankruptcy within the next 24 months. Our present 90 days 'Buy-Sell' recommendation on the company is Hold.

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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 Vlad Skutelnik do not own shares of Desktop Metal. Please refer to our Terms of Use for any information regarding our disclosure principles.

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