Johnson Controls Int Corporate Bonds and Leverage Analysis
| JCI Stock | USD 83.99 1.01 1.22% |
Johnson Controls Int holds a debt-to-equity ratio of 0.587. As of now, Johnson Controls' Short and Long Term Debt is decreasing as compared to previous years. The Johnson Controls' current Net Debt To EBITDA is estimated to increase to 3.48, while Long Term Debt is projected to decrease to under 5.8 B. With a high degree of financial leverage come high-interest payments, which usually reduce Johnson Controls' Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Johnson Controls' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Johnson Controls' 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 Johnson Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Johnson Controls' stakeholders.
For most companies, including Johnson Controls, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Johnson Controls International, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Johnson Controls' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book 3.4134 | Book Value 24.197 | Operating Margin 0.1441 | Profit Margin 0.0743 | Return On Assets 0.0356 |
Johnson |
Given the importance of Johnson Controls' capital structure, the first step in the capital decision process is for the management of Johnson Controls 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 Johnson Controls International to issue bonds at a reasonable cost.
Johnson Controls Int Debt to Cash Allocation
As Johnson Controls International follows its natural business cycle, the capital allocation decisions will not magically go away. Johnson Controls' 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.
Johnson Controls International has 9.49 B in debt with debt to equity (D/E) ratio of 0.59, which is OK given its current industry classification. Johnson Controls Int has a current ratio of 1.02, demonstrating that it may not be capable to disburse its financial commitments when the payables are due. Note however, debt could still be an excellent tool for Johnson to invest in growth at high rates of return. Johnson Controls Total Assets Over Time
Johnson Controls Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Johnson Controls 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.Johnson Controls Debt Ratio | 22.0 |
Johnson Controls Corporate Bonds Issued
Most Johnson bonds can be classified according to their maturity, which is the date when Johnson Controls International 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.
Johnson Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Johnson Controls Use of Financial Leverage
Understanding the composition and structure of Johnson Controls' 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 Johnson Controls' 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 | 9.5 B | 10 B | |
| Net Debt | 8.9 B | 9.3 B | |
| Short Term Debt | 1.5 B | 1.6 B | |
| Long Term Debt | 9 B | 5.8 B | |
| Long Term Debt Total | 8.5 B | 7.5 B | |
| Short and Long Term Debt | 927 M | 1.1 B | |
| Net Debt To EBITDA | 3.32 | 3.48 | |
| Debt To Equity | 0.59 | 0.63 | |
| Interest Debt Per Share | 14.09 | 14.79 | |
| Debt To Assets | 0.22 | 0.22 | |
| Long Term Debt To Capitalization | 0.33 | 0.24 | |
| Total Debt To Capitalization | 0.37 | 0.40 | |
| Debt Equity Ratio | 0.59 | 0.63 | |
| Debt Ratio | 0.22 | 0.22 | |
| Cash Flow To Debt Ratio | 0.17 | 0.16 |
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When determining whether Johnson Controls Int offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Johnson Controls' 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 Johnson Controls International Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Johnson Controls International Stock:Check out the analysis of Johnson Controls Fundamentals Over Time. You can also try the Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
Is Building Products 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 Johnson Controls. If investors know Johnson 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 Johnson Controls 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 0.18 | Dividend Share 1.48 | Earnings Share 2.08 | Revenue Per Share 34.064 | Quarterly Revenue Growth (0.1) |
The market value of Johnson Controls Int is measured differently than its book value, which is the value of Johnson that is recorded on the company's balance sheet. Investors also form their own opinion of Johnson Controls' value that differs from its market value or its book value, called intrinsic value, which is Johnson Controls' 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 Johnson Controls' market value can be influenced by many factors that don't directly affect Johnson Controls' 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 Johnson Controls' value and its price as these two are different measures arrived at by different means. Investors typically determine if Johnson Controls is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Johnson Controls' 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.