Grupo Hotelero Santa Corporate Bonds and Leverage Analysis
| HOTEL Stock | MXN 4.00 0.10 2.56% |
Grupo Hotelero Santa has over 2.98 Billion in debt which may indicate that it relies heavily on debt financing. . Grupo Hotelero's financial risk is the risk to Grupo Hotelero stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Grupo Hotelero'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. Grupo Hotelero'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 Grupo Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Grupo Hotelero's stakeholders.
For most companies, including Grupo Hotelero, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Grupo Hotelero Santa, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Grupo Hotelero's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
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Given the importance of Grupo Hotelero's capital structure, the first step in the capital decision process is for the management of Grupo Hotelero 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 Grupo Hotelero Santa to issue bonds at a reasonable cost.
Grupo Hotelero Santa Debt to Cash Allocation
Many companies such as Grupo Hotelero, eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
Grupo Hotelero Santa has accumulated 2.98 B in total debt with debt to equity ratio (D/E) of 49.3, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Grupo Hotelero Santa has a current ratio of 1.05, suggesting that it is not liquid enough and may have problems paying out its financial obligations in time and when they become due. Debt can assist Grupo Hotelero until it has trouble settling it off, either with new capital or with free cash flow. So, Grupo Hotelero'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 Grupo Hotelero Santa sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Grupo to invest in growth at high rates of return. When we think about Grupo Hotelero's use of debt, we should always consider it together with cash and equity.Grupo Hotelero 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 Grupo Hotelero's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Grupo Hotelero, which in turn will lower the firm's financial flexibility.Grupo Hotelero Corporate Bonds Issued
Understaning Grupo Hotelero Use of Financial Leverage
Leverage ratios show Grupo Hotelero'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 Grupo Hotelero'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).
Grupo Hotelero Santa Fe, S.A.B. de C.V. acquires, develops, and operates urban and beach hotels in Mexico. Grupo Hotelero Santa Fe, S.A.B. de C.V. is headquartered in Mexico City, Mexico. GRUPO HOTELERO operates under Lodging classification in Mexico and is traded on Mexico Stock Exchange. It employs 1671 people. Please read more on our technical analysis page.
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Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.Other Information on Investing in Grupo Stock
Grupo Hotelero financial ratios help investors to determine whether Grupo 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 Grupo with respect to the benefits of owning Grupo Hotelero 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.