Atmos Energy Corporate Bonds and Leverage Analysis

ATO Stock  USD 151.32  0.11  0.07%   
Atmos Energy holds a debt-to-equity ratio of 0.858. At this time, Atmos Energy's Long Term Debt To Capitalization is very stable compared to the past year. As of the 29th of November 2024, Total Debt To Capitalization is likely to grow to 0.57, while Short Term Debt is likely to drop about 1.6 M. With a high degree of financial leverage come high-interest payments, which usually reduce Atmos Energy's Earnings Per Share (EPS).

Asset vs Debt

Equity vs Debt

Atmos Energy's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Atmos Energy's cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the Company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps Atmos Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Atmos Energy's stakeholders.
For most companies, including Atmos Energy, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Atmos Energy, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Atmos Energy's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book
1.9356
Book Value
78.485
Operating Margin
0.3215
Profit Margin
0.2509
Return On Assets
0.0358
At this time, Atmos Energy's Liabilities And Stockholders Equity is very stable compared to the past year. As of the 29th of November 2024, Non Current Liabilities Total is likely to grow to about 10.9 B, while Total Current Liabilities is likely to drop about 1.1 B.
  
Check out the analysis of Atmos Energy Fundamentals Over Time.
To learn how to invest in Atmos Stock, please use our How to Invest in Atmos Energy guide.
View Bond Profile
Given the importance of Atmos Energy's capital structure, the first step in the capital decision process is for the management of Atmos Energy to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of Atmos Energy to issue bonds at a reasonable cost.

Atmos Energy Bond Ratings

Atmos Energy financial ratings play a critical role in determining how much Atmos Energy have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for Atmos Energy's borrowing costs.
Piotroski F Score
3
FrailView
Beneish M Score
(2.95)
Unlikely ManipulatorView

Atmos Energy Debt to Cash Allocation

As Atmos Energy follows its natural business cycle, the capital allocation decisions will not magically go away. Atmos Energy's decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors.
Atmos Energy has 7.79 B in debt with debt to equity (D/E) ratio of 0.86, which is OK given its current industry classification. Atmos Energy has a current ratio of 0.99, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Note however, debt could still be an excellent tool for Atmos to invest in growth at high rates of return.

Atmos Energy Common Stock Shares Outstanding Over Time

Atmos Energy Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Atmos Energy uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

Atmos Energy Debt Ratio

    
  42.0   
It appears that about 58% of Atmos Energy's assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the Atmos Energy's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Atmos Energy, which in turn will lower the firm's financial flexibility.

Atmos Energy Corporate Bonds Issued

Atmos Energy issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Atmos Energy uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt.

Atmos Short Long Term Debt Total

Short Long Term Debt Total

8.17 Billion

At this time, Atmos Energy's Short and Long Term Debt Total is very stable compared to the past year.

Understaning Atmos Energy Use of Financial Leverage

Leverage ratios show Atmos Energy's total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Atmos Energy's financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
Last ReportedProjected for Next Year
Short and Long Term Debt Total7.8 B8.2 B
Net Debt7.5 B7.9 B
Short Term Debt1.7 M1.6 M
Long Term Debt7.9 B8.3 B
Long Term Debt Total6.6 B3.4 B
Short and Long Term Debt9.9 M9.4 M
Net Debt To EBITDA 3.57  2.94 
Debt To Equity 0.64  1.23 
Interest Debt Per Share 52.30  54.91 
Debt To Assets 0.31  0.42 
Long Term Debt To Capitalization 0.39  0.52 
Total Debt To Capitalization 0.39  0.57 
Debt Equity Ratio 0.64  1.23 
Debt Ratio 0.31  0.42 
Cash Flow To Debt Ratio 0.22  0.18 
Please read more on our technical analysis page.

Pair Trading with Atmos Energy

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if Atmos Energy position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Atmos Energy will appreciate offsetting losses from the drop in the long position's value.

Moving together with Atmos Stock

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Moving against Atmos Stock

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The ability to find closely correlated positions to Atmos Energy could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Atmos Energy when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back Atmos Energy - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling Atmos Energy to buy it.
The correlation of Atmos Energy is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as Atmos Energy moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Atmos Energy moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for Atmos Energy can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
When determining whether Atmos Energy offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Atmos Energy's financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Atmos Energy Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Atmos Energy Stock:
Check out the analysis of Atmos Energy Fundamentals Over Time.
To learn how to invest in Atmos Stock, please use our How to Invest in Atmos Energy guide.
You can also try the Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
Is Gas Utilities space expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of Atmos Energy. If investors know Atmos will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about Atmos Energy listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth
0.148
Earnings Share
6.83
Revenue Per Share
27.161
Quarterly Revenue Growth
0.059
Return On Assets
0.0358
The market value of Atmos Energy is measured differently than its book value, which is the value of Atmos that is recorded on the company's balance sheet. Investors also form their own opinion of Atmos Energy's value that differs from its market value or its book value, called intrinsic value, which is Atmos Energy's true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because Atmos Energy's market value can be influenced by many factors that don't directly affect Atmos Energy's underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between Atmos Energy's value and its price as these two are different measures arrived at by different means. Investors typically determine if Atmos Energy is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Atmos Energy's price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.