Epsilon Energy Corporate Bonds and Leverage Analysis
| EPSN Stock | USD 5.93 0.11 1.82% |
Epsilon Energy holds a debt-to-equity ratio of 0.42. As of the 25th of November 2024, Cash Flow To Debt Ratio is likely to grow to 198.77, though Net Debt is likely to grow to (12.2 M). With a high degree of financial leverage come high-interest payments, which usually reduce Epsilon Energy's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Epsilon 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. Epsilon 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 Epsilon Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Epsilon Energy's stakeholders.
For most companies, including Epsilon Energy, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Epsilon Energy, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Epsilon 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 1.3422 | Book Value 4.502 | Operating Margin 0.0935 | Profit Margin 0.1697 | Return On Assets 0.0322 |
Epsilon |
Given the importance of Epsilon Energy's capital structure, the first step in the capital decision process is for the management of Epsilon 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 Epsilon Energy to issue bonds at a reasonable cost.
Epsilon Energy Bond Ratings
Epsilon Energy financial ratings play a critical role in determining how much Epsilon 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 Epsilon Energy's borrowing costs.| Piotroski F Score | 6 | Healthy | View |
| Beneish M Score | (2.63) | Unlikely Manipulator | View |
Epsilon Energy Debt to Cash Allocation
As Epsilon Energy follows its natural business cycle, the capital allocation decisions will not magically go away. Epsilon 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.
Epsilon Energy currently holds 563.38 K in liabilities with Debt to Equity (D/E) ratio of 0.42, which is about average as compared to similar companies. Epsilon Energy has a current ratio of 4.69, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Epsilon Energy's use of debt, we should always consider it together with its cash and equity.Epsilon Energy Total Assets Over Time
Epsilon Energy Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Epsilon 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.Epsilon Energy Debt Ratio | 0.0762 |
Epsilon Energy Corporate Bonds Issued
Epsilon Net Debt
Understaning Epsilon Energy Use of Financial Leverage
Leverage ratios show Epsilon 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 Epsilon 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 | -12.8 M | -12.2 M | |
| Short and Long Term Debt Total | 563.4 K | 535.2 K | |
| Short Term Debt | 172.9 K | 164.3 K | |
| Net Debt To EBITDA | (0.73) | (0.69) | |
| Interest Debt Per Share | 0.01 | 0.01 | |
| Long Term Debt To Capitalization | 0.03 | 0.03 | |
| Cash Flow To Debt Ratio | 189.30 | 198.77 |
Pair Trading with Epsilon 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 Epsilon 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 Epsilon Energy will appreciate offsetting losses from the drop in the long position's value.Moving together with Epsilon Stock
| 0.66 | LB | LandBridge Company Downward Rally | PairCorr |
Moving against Epsilon Stock
The ability to find closely correlated positions to Epsilon 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 Epsilon 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 Epsilon 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 Epsilon Energy to buy it.
The correlation of Epsilon 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 Epsilon Energy moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Epsilon 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 Epsilon 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.Check out the analysis of Epsilon Energy Fundamentals Over Time. To learn how to invest in Epsilon Stock, please use our How to Invest in Epsilon Energy guide.You can also try the Content Syndication module to quickly integrate customizable finance content to your own investment portal.
Is Oil & Gas Exploration & Production 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 Epsilon Energy. If investors know Epsilon 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 Epsilon 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 (0.05) | Dividend Share 0.25 | Earnings Share 0.24 | Revenue Per Share 1.416 | Quarterly Revenue Growth 0.155 |
The market value of Epsilon Energy is measured differently than its book value, which is the value of Epsilon that is recorded on the company's balance sheet. Investors also form their own opinion of Epsilon Energy's value that differs from its market value or its book value, called intrinsic value, which is Epsilon 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 Epsilon Energy's market value can be influenced by many factors that don't directly affect Epsilon 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 Epsilon Energy's value and its price as these two are different measures arrived at by different means. Investors typically determine if Epsilon Energy is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Epsilon 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.