Meritor Story

MTOR -- USA Stock

USD 30.62 0.45 1.45%

Macroaxis Story

Meritor is scheduled to announce its earnings today. The next earnings report is expected on the 29th of April 2021. Meritor PPandE Turnover is relatively stable at the moment as compared to the past year. Meritor reported last year PPandE Turnover of 6.78. As of 02/03/2021, Receivables Turnover is likely to grow to 5.55, while Average Assets are likely to drop slightly above 3.3 B. While some of us are becoming more enthusiastic about consumer cyclical space, let's sum up Meritor 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 three weeks ago

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You think Meritor (NYSE:MTOR) debt is an issue for retail investors?

This firm currently holds 1.3 B in liabilities with Debt to Equity (D/E) ratio of 2.63, implying the firm greatly relies on financing operations through barrowing. On a scale of 0 to 100, Meritor holds a performance score of 6. The company secures a Beta (Market Risk) of 2.0015, which conveys a somewhat significant risk relative to the market. Let's try to break down what Meritor's beta means in this case. As the market goes up, the company is expected to outperform it. However, if the market returns are negative, Meritor will likely underperform. Although it is vital to follow Meritor price patterns, it is good to be conservative about what you can do with the information regarding equity historical price patterns. The philosophy towards estimating future performance of any stock is to evaluate the business as a whole together with its past performance, including all available fundamental and technical indicators. By analyzing Meritor technical indicators, you can presently evaluate if the expected return of 0.3% will be sustainable into the future. Please exercises Meritor potential upside, as well as the relationship between the accumulation distribution and price action indicator to make a quick decision on whether Meritor current price movements will revert.

Meritor financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Meritor, including all of Meritor'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 Meritor assets, the company is considered highly leveraged. Understanding the composition and structure of overall Meritor 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 Meritor Total Liabilities

Meritor liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Meritor 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 Meritor balance sheet include debt obligations and money owed to different Meritor vendors, workers, and loan providers. Below is the chart of Meritor short long-term liabilities accounts currently reported on its balance sheet.

You can use Meritor financial leverage analysis tool to get a better grip on understanding its financial position

How important is Meritor's Liquidity

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

Detailed Perspective On Meritor

The company reported the previous year's revenue of 3.04 B. Net Income was 244 M with profit before overhead, payroll, taxes, and interest of 328 M.

Asset Breakdown

1.8 B

Assets Non Current

554.1 M

Goodwill

1.1 B

Current Assets

	Total Assets	3.27 Billion
	Current Assets	1.15 Billion
	Assets Non Current	1.75 Billion
	Goodwill	554.13 Million

Will Meritor growth be viable after the spike?

Meritor latest semi variance advances over 4.69. Meritor currently demonstrates below-verage downside deviation. It has Information Ratio of -0.01 and Jensen Alpha of -0.18. However, we do advice investors to further question Meritor expected returns to ensure all indicators are consistent with the current outlook about its relatively low value at risk.

The Current Takeaway on Meritor Investment

While some companies under the auto parts industry are still a bit expensive, Meritor may offer a potential longer-term growth to retail investors. While some retail 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 Meritor.

About Contributor

Raphi Shpitalnik is a Junior Member of Macroaxs Editorial Board. Raphael is a young entrepreneur who joined Macroaxis on a part-time base at the beginning of the pandemic and eventually acquired a real test for investing and fintech. He likes to analyze different equity instruments across a wide range of industries, focusing primarily on consumer products, sports, fintech, cannabis, and AI. View Profile

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 Raphi Shpitalnik do not own shares of Meritor. Please refer to our Terms of Use for any information regarding our disclosure principles.

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