Rev Debt
| REVG Stock | USD 34.45 0.50 1.47% |
Rev Group holds a debt-to-equity ratio of 0.605. . Rev's financial risk is the risk to Rev stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Rev'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. Rev'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 Rev Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Rev's stakeholders.
For most companies, including Rev, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Rev Group, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Rev's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Rev's debt-to-equity ratio measures a Company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which Rev is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of Rev to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Rev is said to be less leveraged. If creditors hold a majority of Rev's assets, the Company is said to be highly leveraged.
Rev |
Rev Bond Ratings
Rev Group financial ratings play a critical role in determining how much Rev 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 Rev's borrowing costs.| Piotroski F Score | 5 | Healthy | View |
| Beneish M Score | (2.42) | Unlikely Manipulator | View |
Rev Group Debt to Cash Allocation
Many companies such as Rev, 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.
Rev Group currently holds 118 M in liabilities with Debt to Equity (D/E) ratio of 0.61, which is about average as compared to similar companies. Rev Group has a current ratio of 1.49, which is within standard range for the sector. Note, when we think about Rev's use of debt, we should always consider it together with its cash and equity.Rev 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 Rev's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Rev, which in turn will lower the firm's financial flexibility.Rev Corporate Bonds Issued
Most Rev bonds can be classified according to their maturity, which is the date when Rev Group 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.
Understaning Rev Use of Financial Leverage
Rev's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Rev's total debt position, including all outstanding debt obligations, and compares it with Rev's equity. Financial leverage can amplify the potential profits to Rev's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Rev is unable to cover its debt costs.
REV Group, Inc. designs, manufactures, and distributes specialty vehicles, and related aftermarket parts and services in the United States, Canada, Europe, Africa, and internationally. The company was formerly known as Allied Specialty Vehicles, Inc. and changed its name to REV Group, Inc. in November 2015. Rev operates under Farm Heavy Construction Machinery classification in the United States and is traded on New York Stock Exchange. It employs 6800 people. Please read more on our technical analysis page.
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Is Construction Machinery & Heavy Transportation Equipment 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 Rev. If investors know Rev 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 Rev listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of Rev Group is measured differently than its book value, which is the value of Rev that is recorded on the company's balance sheet. Investors also form their own opinion of Rev's value that differs from its market value or its book value, called intrinsic value, which is Rev'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 Rev's market value can be influenced by many factors that don't directly affect Rev'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 Rev's value and its price as these two are different measures arrived at by different means. Investors typically determine if Rev is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Rev'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.