What is August outlook for E2open (USA Stocks:ETWO)?

As we step into August, it's time to turn our attention to E2open Parent Holdings (ETWO), a prominent player in the Software - Application industry. The company, with a market valuation of approximately $4.58 billion, has been the subject of much debate among investors. Despite the company's substantial total assets of $3.1 billion, it is burdened with significant liabilities, including a long-term debt of $1 billion and total current liabilities of $339 million. However, with an analyst target price estimated value of $6.21 and an overall consensus of 'Hold', there is potential for ETWO to make strides in the US stock market. E2open Parent Holdings is set to release its earnings report today, with the subsequent financial report anticipated on July 8, 2024. The company's Operating Cash Flow Per Share remains stable compared to the previous year. As of July 5, 2024, the Pb Ratio is projected to increase to 1.29, while the Stock Based Compensation To Revenue is expected to decrease to 0.04. Despite the indifference of many baby boomers towards the software sector, E2open Parent Holdings stands out as a compelling choice for millennials.
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Reviewed by Michael Smolkin

E2open Parent Holdings currently has liabilities of $1.08 billion, with a Debt to Equity (D/E) ratio of 0.36, typical for its industry. However, its current ratio of 0.75 indicates a negative working capital, potentially signaling difficulties in meeting financial obligations. It's important to consider E2open's debt in conjunction with its cash and equity. The company's Profit Margin (PM) is -0.5%, suggesting it may struggle with executing its pricing strategies or controlling operational costs, which is significantly below average. Its Operating Margin (OM) is -0.07%, meaning for every $100 in sales, it incurs a net operating loss of $0.07.

Primary Points

E2open Parent Holdings (ETWO) presents an intriguing investment opportunity this August, particularly when considering its leverage potential. The company's strong EBITDA of $164.5M indicates a robust operating profitability, while its net working capital of $463K suggests a healthy short-term financial position. However, investors should also note the company's significant selling and marketing expenses of $87.7M, which could impact the bottom line. Despite this, the company's Jensen Alpha of 0.1621 suggests that it has been generating a satisfactory risk-adjusted return, making it a potential candidate for a leveraged investment strategy.
E2open Parent financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of E2open Parent, including all of E2open Parent'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 E2open Parent assets, the company is considered highly leveraged. Understanding the composition and structure of overall E2open Parent 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 E2open Total Debt

E2open Parent Holdings liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. E2open Parent Holdings 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 E2open Parent balance sheet include debt obligations and money owed to different E2open Parent vendors, workers, and loan providers. Below is the chart of E2open main long-term debt accounts currently reported on its balance sheet.
You can use E2open Parent Holdings financial leverage analysis tool to get a better grip on understanding its financial position

How important is E2open Parent's Liquidity

E2open Parent financial leverage refers to using borrowed capital as a funding source to finance E2open Parent Holdings ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. E2open Parent 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 E2open Parent'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 E2open Parent'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 E2open Parent's total debt and its cash.

Another Outlook On E2open Parent

The modest gains experienced by current holders of E2open Parent could raise concerns from investors as the entity is trading at a share price of 4.58 on very low momentum in volume. The company executives have been quite successful in maneuvering the stock at opportune times to take advantage of all market conditions in June. The stock standard deviation of daily returns for 90 days investing horizon is currently 2.8. The current volatility is consistent with the ongoing market swings in June 2024 as well as with E2open Parent unsystematic, company-specific events.

Liabilities Breakdown

114.6 M
Non Current Liabilities Total
95.8 M
Non Current Liabilities Other
Total Current Liabilities3.43 Million
Liabilities And Stockholders Equity414.81 Million
Non Current Liabilities Total114.55 Million
Non Current Liabilities Other95.82 Million
Every cloud has a silver lining, and E2open Parent Holdings (ETWO) might just be the investment opportunity you've been waiting for. Despite reporting a significant net income loss of 1.2B, the company's potential is reflected in its strong total revenue of 634.6M and EBITDA of 164.5M. The firm's debt to equity ratio stands at a modest 0.36%, indicating a balanced financial structure. Moreover, with 96.36% of its shares owned by institutions, the market's confidence in ETWO is evident. The company's price to book ratio of 0.95X, coupled with a target price of 4.58, suggests a potential upside of 4.42, making it a stock to watch in August..

Our perspective of the recent E2open Parent roll up

E2open Parent Holdings, Inc. (NYSE: ETWO) recently saw its Information Ratio, a measure of potential risk-adjusted return, increase to 0.06. Despite this, there are signs that the stock price may decline, indicating that the company's recent roll-up may not have been as successful as expected. Investors are advised to monitor the stock's performance closely. As of July 5th, E2open Parent reported a Downside Deviation of 2.13, a coefficient of variation of 1677.54, and a Mean Deviation of 1.83. E2open Parent Holdings' technical analysis allows investors to use historical prices and volume patterns to predict future price directions.

Our Final Take On E2open Parent

Although some other firms within the software—application industry are still a little expensive, even after the recent corrections, E2open Parent may offer a potential longer-term growth to investors. With an impartial outlook on the current market volatility, it may be better to hold off any inventment activity and neither buy nor short any shares of E2open Parent at this time. The E2open Parent Holdings risk-reward trade off 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 E2open Parent.

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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 E2open Parent Holdings. Please refer to our Terms of Use for any information regarding our disclosure principles.

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