Continue to hold Shaw Communications (NYSE:SJR) based on its current debt obligations?
 | By Vlad Skutelnik | Macroaxis Story |
Shaw Communications is scheduled to announce its earnings today. While many traders are getting carried away by overanalyzing communication services space, it is reasonable to sum up Shaw Communications as an investment alternative. Here we also measure the ability of Shaw Communications to meet its long-term debt obligations, such as interest payments on debt, the final principal payment on the debt, and any other fixed obligations like lease payments.
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Reviewed by Gabriel Shpitalnik
The company has 3.27 B in debt with debt to equity (D/E) ratio of 0.97, which is OK given its current industry classification. Shaw Communications has a current ratio of 0.87, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Shaw Communications financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Shaw Communications, including all of Shaw Communications'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 Shaw Communications assets, the company is considered highly leveraged. Understanding the composition and structure of overall Shaw Communications 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.
How important is Shaw Communications's Liquidity
Shaw Communications financial leverage refers to using borrowed capital as a funding source to finance Shaw Communications Class ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Shaw Communications 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 Shaw Communications' 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 Shaw Communications' 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 Shaw Communications's total debt and its cash.
Scrutinizing Shaw Communications - a closer look
The entity reported the last year's revenue of 3.94 B. Total Income to common stockholders was 43.6 M with profit before taxes, overhead, and interest of 2.38 B.
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