Latest news with #DavidIben
Yahoo
08-05-2025
- Business
- Yahoo
Is Trip.com Group (NASDAQ:TCOM) Using Too Much Debt?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We note that Group Limited (NASDAQ:TCOM) does have debt on its balance sheet. But the more important question is: how much risk is that debt creating? AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. Part and parcel of capitalism is the process of 'creative destruction' where failed businesses are mercilessly liquidated by their bankers. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. When we examine debt levels, we first consider both cash and debt levels, together. As you can see below, Group had CN¥39.6b of debt at December 2024, down from CN¥45.0b a year prior. However, it does have CN¥76.9b in cash offsetting this, leading to net cash of CN¥37.3b. Zooming in on the latest balance sheet data, we can see that Group had liabilities of CN¥74.0b due within 12 months and liabilities of CN¥25.1b due beyond that. On the other hand, it had cash of CN¥76.9b and CN¥21.8b worth of receivables due within a year. So these liquid assets roughly match the total liabilities. Having regard to Group's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the CN¥289.1b company is struggling for cash, we still think it's worth monitoring its balance sheet. While it does have liabilities worth noting, Group also has more cash than debt, so we're pretty confident it can manage its debt safely. See our latest analysis for Group Another good sign is that Group has been able to increase its EBIT by 25% in twelve months, making it easier to pay down debt. The balance sheet is clearly the area to focus on when you are analysing debt. But ultimately the future profitability of the business will decide if Group can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts. Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. While Group has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Happily for any shareholders, Group actually produced more free cash flow than EBIT over the last three years. There's nothing better than incoming cash when it comes to staying in your lenders' good graces. We could understand if investors are concerned about Group's liabilities, but we can be reassured by the fact it has has net cash of CN¥37.3b. And it impressed us with free cash flow of CN¥19b, being 166% of its EBIT. So is Group's debt a risk? It doesn't seem so to us. Over time, share prices tend to follow earnings per share, so if you're interested in Group, you may well want to click here to check an interactive graph of its earnings per share history. If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
04-05-2025
- Business
- Yahoo
Is Mondelez International (NASDAQ:MDLZ) Using Too Much Debt?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. Importantly, Mondelez International, Inc. (NASDAQ:MDLZ) does carry debt. But is this debt a concern to shareholders? AI is about to change healthcare. These 20 stocks are working on everything from early diagnostics to drug discovery. The best part - they are all under $10bn in marketcap - there is still time to get in early. Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together. The chart below, which you can click on for greater detail, shows that Mondelez International had US$19.5b in debt in March 2025; about the same as the year before. However, it does have US$1.56b in cash offsetting this, leading to net debt of about US$18.0b. We can see from the most recent balance sheet that Mondelez International had liabilities of US$21.0b falling due within a year, and liabilities of US$22.1b due beyond that. Offsetting these obligations, it had cash of US$1.56b as well as receivables valued at US$5.26b due within 12 months. So it has liabilities totalling US$36.3b more than its cash and near-term receivables, combined. This deficit isn't so bad because Mondelez International is worth a massive US$87.7b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt. View our latest analysis for Mondelez International We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it. Mondelez International has net debt to EBITDA of 3.2 suggesting it uses a fair bit of leverage to boost returns. On the plus side, its EBIT was 8.4 times its interest expense, and its net debt to EBITDA, was quite high, at 3.2. Importantly, Mondelez International's EBIT fell a jaw-dropping 40% in the last twelve months. If that earnings trend continues then paying off its debt will be about as easy as herding cats on to a roller coaster. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Mondelez International's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts. Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. During the last three years, Mondelez International produced sturdy free cash flow equating to 61% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to. Mondelez International's EBIT growth rate was a real negative on this analysis, although the other factors we considered cast it in a significantly better light. For example, its interest cover is relatively strong. Taking the abovementioned factors together we do think Mondelez International's debt poses some risks to the business. While that debt can boost returns, we think the company has enough leverage now. There's no doubt that we learn most about debt from the balance sheet. However, not all investment risk resides within the balance sheet - far from it. For example, we've discovered 1 warning sign for Mondelez International that you should be aware of before investing here. If, after all that, you're more interested in a fast growing company with a rock-solid balance sheet, then check out our list of net cash growth stocks without delay. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Yahoo
09-04-2025
- Business
- Yahoo
Is Pfizer (NYSE:PFE) A Risky Investment?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. Importantly, Pfizer Inc. (NYSE:PFE) does carry debt. But the more important question is: how much risk is that debt creating? This technology could replace computers: discover the 20 stocks are working to make quantum computing a reality. Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more frequent (but still costly) occurrence is where a company must issue shares at bargain-basement prices, permanently diluting shareholders, just to shore up its balance sheet. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we think about a company's use of debt, we first look at cash and debt together. As you can see below, Pfizer had US$64.8b of debt at December 2024, down from US$72.2b a year prior. However, because it has a cash reserve of US$20.5b, its net debt is less, at about US$44.3b. Zooming in on the latest balance sheet data, we can see that Pfizer had liabilities of US$43.0b due within 12 months and liabilities of US$81.9b due beyond that. Offsetting this, it had US$20.5b in cash and US$14.8b in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$89.6b. This deficit is considerable relative to its very significant market capitalization of US$128.3b, so it does suggest shareholders should keep an eye on Pfizer's use of debt. This suggests shareholders would be heavily diluted if the company needed to shore up its balance sheet in a hurry. See our latest analysis for Pfizer We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses. With a debt to EBITDA ratio of 1.9, Pfizer uses debt artfully but responsibly. And the fact that its trailing twelve months of EBIT was 7.2 times its interest expenses harmonizes with that theme. It is well worth noting that Pfizer's EBIT shot up like bamboo after rain, gaining 30% in the last twelve months. That'll make it easier to manage its debt. There's no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Pfizer can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts . Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. So we always check how much of that EBIT is translated into free cash flow. During the last three years, Pfizer produced sturdy free cash flow equating to 59% of its EBIT, about what we'd expect. This cold hard cash means it can reduce its debt when it wants to. When it comes to the balance sheet, the standout positive for Pfizer was the fact that it seems able to grow its EBIT confidently. But the other factors we noted above weren't so encouraging. For example, its level of total liabilities makes us a little nervous about its debt. Considering this range of data points, we think Pfizer is in a good position to manage its debt levels. Having said that, the load is sufficiently heavy that we would recommend any shareholders keep a close eye on it. There's no doubt that we learn most about debt from the balance sheet. But ultimately, every company can contain risks that exist outside of the balance sheet. To that end, you should learn about the 3 warning signs we've spotted with Pfizer (including 2 which shouldn't be ignored) . If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
Yahoo
17-02-2025
- Business
- Yahoo
Does Cloudflare (NYSE:NET) Have A Healthy Balance Sheet?
David Iben put it well when he said, 'Volatility is not a risk we care about. What we care about is avoiding the permanent loss of capital.' It's only natural to consider a company's balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Cloudflare, Inc. (NYSE:NET) does use debt in its business. But should shareholders be worried about its use of debt? Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. If things get really bad, the lenders can take control of the business. While that is not too common, we often do see indebted companies permanently diluting shareholders because lenders force them to raise capital at a distressed price. Of course, plenty of companies use debt to fund growth, without any negative consequences. The first thing to do when considering how much debt a business uses is to look at its cash and debt together. See our latest analysis for Cloudflare As you can see below, Cloudflare had US$1.29b of debt, at December 2024, which is about the same as the year before. You can click the chart for greater detail. But on the other hand it also has US$1.86b in cash, leading to a US$568.6m net cash position. We can see from the most recent balance sheet that Cloudflare had liabilities of US$793.7m falling due within a year, and liabilities of US$1.46b due beyond that. Offsetting this, it had US$1.86b in cash and US$333.3m in receivables that were due within 12 months. So its liabilities outweigh the sum of its cash and (near-term) receivables by US$65.7m. Having regard to Cloudflare's size, it seems that its liquid assets are well balanced with its total liabilities. So while it's hard to imagine that the US$59.0b company is struggling for cash, we still think it's worth monitoring its balance sheet. Despite its noteworthy liabilities, Cloudflare boasts net cash, so it's fair to say it does not have a heavy debt load! There's no doubt that we learn most about debt from the balance sheet. But it is future earnings, more than anything, that will determine Cloudflare's ability to maintain a healthy balance sheet going forward. So if you're focused on the future you can check out this free report showing analyst profit forecasts. Over 12 months, Cloudflare reported revenue of US$1.7b, which is a gain of 29%, although it did not report any earnings before interest and tax. With any luck the company will be able to grow its way to profitability. While Cloudflare lost money on an earnings before interest and tax (EBIT) level, it actually generated positive free cash flow US$167m. So although it is loss-making, it doesn't seem to have too much near-term balance sheet risk, keeping in mind the net cash. The good news for Cloudflare shareholders is that its revenue growth is strong, making it easier to raise capital if need be. But we still think it's somewhat risky. When I consider a company to be a bit risky, I think it is responsible to check out whether insiders have been reporting any share sales. Luckily, you can click here ito see our graphic depicting Cloudflare insider transactions. If you're interested in investing in businesses that can grow profits without the burden of debt, then check out this free list of growing businesses that have net cash on the balance sheet. Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned. Sign in to access your portfolio
