Genmab AS Corporate Bonds and Leverage Analysis
| GMAB Stock | DKK 1,526 15.00 0.99% |
Genmab AS holds a debt-to-equity ratio of 0.018. With a high degree of financial leverage come high-interest payments, which usually reduce Genmab AS's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Genmab AS'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. Genmab AS'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 Genmab Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Genmab AS's stakeholders.
For most companies, including Genmab AS, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Genmab AS, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Genmab AS's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Genmab |
Given the importance of Genmab AS's capital structure, the first step in the capital decision process is for the management of Genmab AS 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 Genmab AS to issue bonds at a reasonable cost.
Genmab AS Debt to Cash Allocation
Genmab AS has accumulated 378 M in total debt with debt to equity ratio (D/E) of 0.02, which may suggest the company is not taking enough advantage from borrowing. Genmab AS has a current ratio of 15.11, suggesting that it is liquid and has the ability to pay its financial obligations in time and when they become due. Debt can assist Genmab AS until it has trouble settling it off, either with new capital or with free cash flow. So, Genmab AS'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 Genmab AS sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Genmab to invest in growth at high rates of return. When we think about Genmab AS's use of debt, we should always consider it together with cash and equity.Genmab AS Assets Financed by Debt
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 Genmab AS's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Genmab AS, which in turn will lower the firm's financial flexibility.Genmab AS Corporate Bonds Issued
Understaning Genmab AS Use of Financial Leverage
Leverage ratios show Genmab AS'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 Genmab AS'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).
Genmab AS develops antibody therapeutics for the treatment of cancer and other diseases primarily in Denmark. Genmab AS was founded in 1999 and is headquartered in Copenhagen, Denmark. Genmab AS is traded on Copenhagen Stock Exchange in Denmark. Please read more on our technical analysis page.
Pair Trading with Genmab AS
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 Genmab AS 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 Genmab AS will appreciate offsetting losses from the drop in the long position's value.Moving together with Genmab Stock
| 0.93 | NOVO-B | Novo Nordisk AS | PairCorr |
| 0.8 | ALK-B | ALK Abell AS | PairCorr |
| 0.86 | BAVA | Bavarian Nordic | PairCorr |
| 0.74 | ZEAL | Zealand Pharma AS | PairCorr |
Moving against Genmab Stock
| 0.86 | DSV | DSV Panalpina AS | PairCorr |
| 0.85 | FLS | FLSmidth | PairCorr |
| 0.42 | ORPHA | Orphazyme AS | PairCorr |
| 0.4 | ISS | ISS AS | PairCorr |
| 0.33 | SYDB | Sydbank AS | PairCorr |
The ability to find closely correlated positions to Genmab AS could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Genmab AS 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 Genmab AS - 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 Genmab AS to buy it.
The correlation of Genmab AS 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 Genmab AS moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Genmab AS 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 Genmab AS 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.Additional Information and Resources on Investing in Genmab Stock
When determining whether Genmab AS offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Genmab AS'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 Genmab As Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Genmab As Stock:Check out the analysis of Genmab AS Fundamentals Over Time. To learn how to invest in Genmab Stock, please use our How to Invest in Genmab AS guide.You can also try the Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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.