Energy Recovery Corporate Bonds and Leverage Analysis
| ERII Stock | USD 15.20 0.13 0.85% |
Energy Recovery holds a debt-to-equity ratio of 0.096. As of now, Energy Recovery's Long Term Debt Total is decreasing as compared to previous years. The Energy Recovery's current Short and Long Term Debt is estimated to increase to about 1.1 M, while Net Debt is projected to decrease to (57.6 M). With a high degree of financial leverage come high-interest payments, which usually reduce Energy Recovery's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Energy Recovery'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. Energy Recovery'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 Energy Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Energy Recovery's stakeholders.
For most companies, including Energy Recovery, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Energy Recovery, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Energy Recovery'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 3.7627 | Book Value 4.041 | Operating Margin 0.1829 | Profit Margin 0.1435 | Return On Assets 0.0379 |
Energy |
Given the importance of Energy Recovery's capital structure, the first step in the capital decision process is for the management of Energy Recovery 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 Energy Recovery to issue bonds at a reasonable cost.
Energy Recovery Bond Ratings
Energy Recovery financial ratings play a critical role in determining how much Energy Recovery 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 Energy Recovery's borrowing costs.| Piotroski F Score | 6 | Healthy | View |
| Beneish M Score | (3.19) | Unlikely Manipulator | View |
Energy Recovery Debt to Cash Allocation
As Energy Recovery follows its natural business cycle, the capital allocation decisions will not magically go away. Energy Recovery'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.
Energy Recovery currently holds 13.28 M in liabilities with Debt to Equity (D/E) ratio of 0.1, which may suggest the company is not taking enough advantage from borrowing. Energy Recovery has a current ratio of 8.32, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Energy Recovery's use of debt, we should always consider it together with its cash and equity.Energy Recovery Total Assets Over Time
Energy Recovery Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Energy Recovery 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.Energy Recovery Debt Ratio | 0.92 |
Energy Recovery Corporate Bonds Issued
Most Energy bonds can be classified according to their maturity, which is the date when Energy Recovery has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.
Energy Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Energy Recovery Use of Financial Leverage
Understanding the composition and structure of Energy Recovery's debt gives an idea of how risky is the capital structure of the business and if it is worth investing in it. The degree of Energy Recovery's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 13.3 M | 13.9 M | |
| Net Debt | -54.8 M | -57.6 M | |
| Long Term Debt | 14.4 M | 15.2 M | |
| Short Term Debt | 3.6 M | 3.8 M | |
| Long Term Debt Total | 14.4 K | 19.8 K | |
| Short and Long Term Debt | 1.1 M | 1.1 M | |
| Net Debt To EBITDA | (2.21) | (2.32) | |
| Debt To Equity | 0.01 | 0.01 | |
| Interest Debt Per Share | 0.03 | 0.03 | |
| Debt To Assets | 0.01 | 0.01 | |
| Total Debt To Capitalization | 0.01 | 0.01 | |
| Debt Equity Ratio | 0.01 | 0.01 | |
| Debt Ratio | 0.01 | 0.01 | |
| Cash Flow To Debt Ratio | 14.55 | 13.82 |
Currently Active Assets on Macroaxis
When determining whether Energy Recovery offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Energy Recovery'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 Energy Recovery Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Energy Recovery Stock:Check out the analysis of Energy Recovery Fundamentals Over Time. For more detail on how to invest in Energy Stock please use our How to Invest in Energy Recovery guide.You can also try the Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
Is Industrial Machinery & Supplies & Components 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 Energy Recovery. If investors know Energy 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 Energy Recovery 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 (0.14) | Earnings Share 0.33 | Revenue Per Share 2.36 | Quarterly Revenue Growth 0.042 | Return On Assets 0.0379 |
The market value of Energy Recovery is measured differently than its book value, which is the value of Energy that is recorded on the company's balance sheet. Investors also form their own opinion of Energy Recovery's value that differs from its market value or its book value, called intrinsic value, which is Energy Recovery'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 Energy Recovery's market value can be influenced by many factors that don't directly affect Energy Recovery'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 Energy Recovery's value and its price as these two are different measures arrived at by different means. Investors typically determine if Energy Recovery is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Energy Recovery'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.