Old Dominion Freight Corporate Bonds and Leverage Analysis
| ODFL Stock | USD 224.11 1.86 0.82% |
Old Dominion Freight holds a debt-to-equity ratio of 0.028. At this time, Old Dominion's Long Term Debt is quite stable compared to the past year. Long Term Debt Total is expected to rise to about 96.5 M this year, although the value of Net Debt is projected to rise to (221.8 M). . Old Dominion's financial risk is the risk to Old Dominion stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Old Dominion'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. Old Dominion'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 Old Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Old Dominion's stakeholders.
For most companies, including Old Dominion, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Old Dominion Freight, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Old Dominion'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 11.5094 | Book Value 19.532 | Operating Margin 0.2733 | Profit Margin 0.2103 | Return On Assets 0.1901 |
Old |
Given the importance of Old Dominion's capital structure, the first step in the capital decision process is for the management of Old Dominion 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 Old Dominion Freight to issue bonds at a reasonable cost.
Old Dominion Bond Ratings
Old Dominion Freight financial ratings play a critical role in determining how much Old Dominion 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 Old Dominion's borrowing costs.| Piotroski F Score | 7 | Strong | View |
| Beneish M Score | (2.10) | Possible Manipulator | View |
Old Dominion Freight Debt to Cash Allocation
Many companies such as Old Dominion, 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.
Old Dominion Freight currently holds 200.38 M in liabilities with Debt to Equity (D/E) ratio of 0.03, which may suggest the company is not taking enough advantage from borrowing. Old Dominion Freight has a current ratio of 1.71, which is within standard range for the sector. Note, when we think about Old Dominion's use of debt, we should always consider it together with its cash and equity.Old Dominion Common Stock Shares Outstanding Over Time
Old Dominion Assets Financed by Debt
The debt-to-assets ratio shows the degree to which Old Dominion 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.Old Dominion Debt Ratio | 1.38 |
Old Dominion Corporate Bonds Issued
Old Dominion issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Old Dominion Freight uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt.
Old Short Long Term Debt Total
Short Long Term Debt Total |
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Understaning Old Dominion Use of Financial Leverage
Leverage ratios show Old Dominion'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 Old Dominion'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).
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 200.4 M | 138 M | |
| Net Debt | -233.4 M | -221.8 M | |
| Short Term Debt | 23 M | 20.6 M | |
| Long Term Debt | 60 M | 104.6 M | |
| Long Term Debt Total | 72 M | 96.5 M | |
| Short and Long Term Debt | 18 M | 24.4 M | |
| Net Debt To EBITDA | (0.12) | (0.11) | |
| Debt To Equity | 0.02 | 0.02 | |
| Interest Debt Per Share | 0.37 | 0.42 | |
| Debt To Assets | 0.01 | 0.01 | |
| Long Term Debt To Capitalization | 0.01 | 0.01 | |
| Total Debt To Capitalization | 0.02 | 0.02 | |
| Debt Equity Ratio | 0.02 | 0.02 | |
| Debt Ratio | 0.01 | 0.01 | |
| Cash Flow To Debt Ratio | 19.62 | 20.60 |
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Is Cargo Ground Transportation 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 Old Dominion. If investors know Old 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 Old Dominion 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 (0.07) | Dividend Share 0.98 | Earnings Share 5.72 | Revenue Per Share 27.363 | Quarterly Revenue Growth (0.03) |
The market value of Old Dominion Freight is measured differently than its book value, which is the value of Old that is recorded on the company's balance sheet. Investors also form their own opinion of Old Dominion's value that differs from its market value or its book value, called intrinsic value, which is Old Dominion'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 Old Dominion's market value can be influenced by many factors that don't directly affect Old Dominion'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 Old Dominion's value and its price as these two are different measures arrived at by different means. Investors typically determine if Old Dominion is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Old Dominion'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.