Canacol Energy Corporate Bonds and Leverage Analysis
| CNE Stock | CAD 4.06 0.03 0.74% |
Canacol Energy holds a debt-to-equity ratio of 2.909. At this time, Canacol Energy's Cash Flow To Debt Ratio is very stable compared to the past year. With a high degree of financial leverage come high-interest payments, which usually reduce Canacol Energy's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Canacol 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. Canacol 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 Canacol Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Canacol Energy's stakeholders.
For most companies, including Canacol Energy, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Canacol Energy, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Canacol 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 0.2804 | Book Value 10.156 | Operating Margin 0.63 | Profit Margin 0.0636 | Return On Assets 0.0894 |
Canacol |
Given the importance of Canacol Energy's capital structure, the first step in the capital decision process is for the management of Canacol 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 Canacol Energy to issue bonds at a reasonable cost.
Canacol Energy Debt to Cash Allocation
Canacol Energy has accumulated 676.43 M in total debt with debt to equity ratio (D/E) of 2.91, implying the company greatly relies on financing operations through barrowing. Canacol Energy has a current ratio of 2.2, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist Canacol Energy until it has trouble settling it off, either with new capital or with free cash flow. So, Canacol Energy's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Canacol Energy sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Canacol to invest in growth at high rates of return. When we think about Canacol Energy's use of debt, we should always consider it together with cash and equity.Canacol Energy Total Assets Over Time
Canacol Energy Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Canacol 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.Canacol Energy Debt Ratio | 27.0 |
Canacol Energy Corporate Bonds Issued
Canacol Net Debt
Net Debt |
|
Understaning Canacol Energy Use of Financial Leverage
Leverage ratios show Canacol 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 Canacol 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 Reported | Projected for Next Year | ||
| Net Debt | 637 M | 668.9 M | |
| Short Term Debt | 3.2 M | 3.1 M | |
| Short and Long Term Debt Total | 676.4 M | 710.3 M | |
| Long Term Debt | 663 M | 385.6 M | |
| Short and Long Term Debt | 30 M | 28.5 M | |
| Long Term Debt Total | 547.4 M | 399.3 M | |
| Net Debt To EBITDA | 3.47 | 3.64 | |
| Debt To Equity | 1.89 | 1.98 | |
| Interest Debt Per Share | 20.99 | 22.04 | |
| Debt To Assets | 0.54 | 0.27 | |
| Long Term Debt To Capitalization | 0.65 | 0.34 | |
| Total Debt To Capitalization | 0.65 | 0.34 | |
| Debt Equity Ratio | 1.89 | 1.98 | |
| Debt Ratio | 0.54 | 0.27 | |
| Cash Flow To Debt Ratio | 0.14 | 0.24 |
Pair Trading with Canacol 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 Canacol 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 Canacol Energy will appreciate offsetting losses from the drop in the long position's value.Moving together with Canacol Stock
Moving against Canacol Stock
The ability to find closely correlated positions to Canacol 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 Canacol 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 Canacol 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 Canacol Energy to buy it.
The correlation of Canacol 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 Canacol Energy moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Canacol 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 Canacol 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.Other Information on Investing in Canacol Stock
Canacol Energy financial ratios help investors to determine whether Canacol Stock is cheap or expensive when compared to a particular measure, such as profits or enterprise value. In other words, they help investors to determine the cost of investment in Canacol with respect to the benefits of owning Canacol Energy security.
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.