Is EXFO Inc (NASDAQ:EXFO) a good hedge for your existing portfolios?
 | By Rifka Kats | Macroaxis Story |
Given the investment horizon of 60 days, EXFO Inc is expected to under-perform the market. In addition to that, the company is 2.74 times more volatile than its market benchmark. It trades about 0.0 of its total potential returns per unit of risk. The DOW is currently generating roughly 0.13 per unit of volatility. As many old-fashioned traders are trying to avoid technology space, it makes sense to outline EXFO Inc Subordinate a little further and try to understand its current volatility patterns. We will inspect why some institutional investors are closely monitoring EXFO Inc's volatility.
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Reviewed by Gabriel Shpitalnik
EXFO Subordinate Voting currently holds 48.62 M in liabilities with Debt to Equity (D/E) ratio of 0.3, which may suggest EXFO Inc is not taking enough advantage from borrowing. The entity has a current ratio of 1.26, suggesting that it is not liquid enough and may have problems paying out its financial obligations when due.
How important is EXFO's Liquidity
EXFO financial leverage refers to using borrowed capital as a funding source to finance EXFO Inc ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. EXFO 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 EXFO'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 EXFO'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 EXFO's total debt and its cash.
What is driving EXFO Investor Appetite?
The small slide in market price for the last few months could raise concerns from institutional investors as the firm it trading at a share price of 3.19 on slow start in volume. The company management teams did not add much value to EXFO Inc investors in September. However, diversifying your holdings with EXFO Inc Subordinate or similar stocks can still protect your portfolio during high-volatility market scenarios. The stock standard deviation of daily returns for 30 days investing horizon is currently 2.76. The current volatility is consistent with the ongoing market swings in September 2020 as well as with EXFO Inc unsystematic, company-specific events.
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