Magellan Energy Current Debt
Magellan Energy holds a debt-to-equity ratio of 2.6. The current Long Term Debt is estimated to decrease to about 3.8 M. The current Short and Long Term Debt is estimated to decrease to about 726.3 K. Magellan Energy's financial risk is the risk to Magellan Energy stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Magellan 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. Magellan 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 Magellan Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Magellan Energy's stakeholders.
For most companies, including Magellan Energy, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Magellan Energy, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Magellan Energy's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Operating Margin (0.04) | Profit Margin (0.16) | Return On Assets (0.05) | Return On Equity (0.99) |
Magellan |
Magellan Energy Debt to Cash Allocation
Many companies such as Magellan Energy, 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.
Magellan Energy currently holds 1.24 M in liabilities with Debt to Equity (D/E) ratio of 2.6, implying the company greatly relies on financing operations through barrowing. Magellan Energy has a current ratio of 0.7, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Note, when we think about Magellan Energy's use of debt, we should always consider it together with its cash and equity.Magellan Energy Total Assets Over Time
Magellan Energy 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 Magellan Energy's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Magellan Energy, which in turn will lower the firm's financial flexibility.Magellan Long Term Debt
Long Term Debt |
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Understaning Magellan Energy Use of Financial Leverage
Magellan Energy's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Magellan Energy's total debt position, including all outstanding debt obligations, and compares it with Magellan Energy's equity. Financial leverage can amplify the potential profits to Magellan Energy's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Magellan Energy is unable to cover its debt costs.
| Last Reported | Projected for Next Year | ||
| Long Term Debt | 5.7 M | 3.8 M | |
| Short and Long Term Debt | 1.4 M | 726.3 K |
Currently Active Assets on Macroaxis
When determining whether Magellan Energy is a strong investment it is important to analyze Magellan Energy's competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Magellan Energy's future performance. For an informed investment choice regarding Magellan Stock, refer to the following important reports:Check out the analysis of Magellan Energy Fundamentals Over Time. For more detail on how to invest in Magellan Stock please use our How to Invest in Magellan Energy guide.You can also try the Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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 Magellan Energy. If investors know Magellan 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 Magellan Energy listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Revenue Growth (0.32) | Return On Assets (0.05) | Return On Equity (0.99) |
The market value of Magellan Energy is measured differently than its book value, which is the value of Magellan that is recorded on the company's balance sheet. Investors also form their own opinion of Magellan Energy's value that differs from its market value or its book value, called intrinsic value, which is Magellan 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 Magellan Energy's market value can be influenced by many factors that don't directly affect Magellan 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 Magellan Energy's value and its price as these two are different measures arrived at by different means. Investors typically determine if Magellan Energy is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Magellan 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.