What is January outlook for Sotherly (NASDAQ:SOHO)?
 | By Raphi Shpitalnik | Macroaxis Story |
The stock is still going through an active upward rally. As many baby boomers are still indifferent towards real estate space, it makes sense to outline Sotherly Hotels as a unique choice for millenniums. We will check if the company can maintain a respectable level of debt while minimizing operating losses.
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Reviewed by Michael Smolkin
This firm currently holds 374.12 M in liabilities with Debt to Equity (D/E) ratio of 6.59, indicating Sotherly Hotels may have difficulties to generate enough cash to satisfy its financial obligations. The company has a current ratio of 0.98, indicating that it has a negative working capital and may not be able to pay financial obligations when due. The company has Profit Margin (PM) of (37.91) %, which may suggest that it does not properly executes on its current pricing strategies or is unable to control all of the operational costs. This is way below average. Similarly, it shows Operating Margin (OM) of (18.34) %, which suggests for every $100 dollars of sales, it generated a net operating loss of -0.18. Sotherly Hotels financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Sotherly Hotels, including all of Sotherly Hotels'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 Sotherly Hotels assets, the company is considered highly leveraged. Understanding the composition and structure of overall Sotherly Hotels 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 Sotherly Hotels on a daily basis if you are holding a position in it. Sotherly Hotels 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 Sotherly Hotels stock to be traded above the $1 level to remain listed. If Sotherly Hotels 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 Sotherly Total Debt
Sotherly Hotels liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Sotherly Hotels 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 Sotherly Hotels balance sheet include debt obligations and money owed to different Sotherly Hotels vendors, workers, and loan providers. Below is the chart of Sotherly main long-term debt accounts currently reported on its balance sheet. You can use Sotherly Hotels financial leverage analysis tool to get a better grip on understanding its financial positionHow important is Sotherly Hotels's Liquidity
Sotherly Hotels financial leverage refers to using borrowed capital as a funding source to finance Sotherly Hotels ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Sotherly Hotels 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 Sotherly Hotels' 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 Sotherly Hotels' 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 Sotherly Hotels's total debt and its cash.
What is the case for Sotherly Hotels Investors
The latest price rise of Sotherly Hotels created some momentum for institutional investors as it was traded today as low as 2.31 and as high as 2.45 per share. The company directors and management may have good odds in positioning the company resources to exploit market volatility in January. The stock standard deviation of daily returns for 30 days investing horizon is currently 8.94. The very high volatility is mostly attributed to the latest market swings and not very good earnings reports from some of the Sotherly Hotels partners.
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