Contango ORE Corporate Bonds and Leverage Analysis
| CTGO Stock | USD 14.08 3.88 21.60% |
Contango ORE holds a debt-to-equity ratio of 1.449. At this time, Contango ORE's Net Debt is very stable compared to the past year. As of the 30th of November 2024, Long Term Debt is likely to grow to about 30.7 M, while Short and Long Term Debt Total is likely to drop about 29.9 M. With a high degree of financial leverage come high-interest payments, which usually reduce Contango ORE's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Contango ORE'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. Contango ORE'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 Contango Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Contango ORE's stakeholders.
For most companies, including Contango ORE, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Contango ORE, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Contango ORE'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 4.6557 | Book Value (1.61) | Return On Assets (0.21) | Return On Equity (5.05) |
Contango |
Given the importance of Contango ORE's capital structure, the first step in the capital decision process is for the management of Contango ORE 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 Contango ORE to issue bonds at a reasonable cost.
Contango ORE Bond Ratings
Contango ORE financial ratings play a critical role in determining how much Contango ORE 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 Contango ORE's borrowing costs.| Piotroski F Score | 2 | Frail | View |
| Beneish M Score | (4.56) | Unlikely Manipulator | View |
Contango ORE Debt to Cash Allocation
As Contango ORE follows its natural business cycle, the capital allocation decisions will not magically go away. Contango ORE'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.
Contango ORE currently holds 44.68 M in liabilities with Debt to Equity (D/E) ratio of 1.45, which is about average as compared to similar companies. Contango ORE has a current ratio of 15.48, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Contango ORE's use of debt, we should always consider it together with its cash and equity.Contango ORE Total Assets Over Time
Contango ORE Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Contango ORE 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.Contango ORE Debt Ratio | 61.0 |
Contango ORE Corporate Bonds Issued
Contango Net Debt
Net Debt |
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Understaning Contango ORE Use of Financial Leverage
Leverage ratios show Contango ORE'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 Contango ORE'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 | 29.2 M | 30.6 M | |
| Long Term Debt | 29.3 M | 30.7 M | |
| Short Term Debt | 9.1 M | 9.5 M | |
| Short and Long Term Debt Total | 44.7 M | 29.9 M | |
| Net Debt To EBITDA | (0.38) | (0.36) | |
| Debt To Equity | (3.07) | (3.23) | |
| Interest Debt Per Share | 5.38 | 3.24 | |
| Debt To Assets | 0.76 | 0.61 | |
| Long Term Debt To Capitalization | 1.65 | 0.93 | |
| Total Debt To Capitalization | 1.48 | 0.88 | |
| Debt Equity Ratio | (3.07) | (3.23) | |
| Debt Ratio | 0.76 | 0.61 | |
| Cash Flow To Debt Ratio | (0.21) | (0.22) |
Pair Trading with Contango ORE
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 Contango ORE 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 Contango ORE will appreciate offsetting losses from the drop in the long position's value.Moving against Contango Stock
The ability to find closely correlated positions to Contango ORE could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Contango ORE 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 Contango ORE - 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 Contango ORE to buy it.
The correlation of Contango ORE 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 Contango ORE moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Contango ORE 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 Contango ORE 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.Check out the analysis of Contango ORE Fundamentals Over Time. To learn how to invest in Contango Stock, please use our How to Invest in Contango ORE guide.You can also try the Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.
Is Diversified Metals & Mining 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 Contango ORE. If investors know Contango 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 Contango ORE listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Earnings Share (7.04) | Return On Assets (0.21) | Return On Equity (5.05) |
The market value of Contango ORE is measured differently than its book value, which is the value of Contango that is recorded on the company's balance sheet. Investors also form their own opinion of Contango ORE's value that differs from its market value or its book value, called intrinsic value, which is Contango ORE'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 Contango ORE's market value can be influenced by many factors that don't directly affect Contango ORE'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 Contango ORE's value and its price as these two are different measures arrived at by different means. Investors typically determine if Contango ORE is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Contango ORE'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.