Simmons First Debt
| SFNC Stock | USD 21.97 0.28 1.29% |
Simmons First National has over 18.85 Billion in debt which may indicate that it relies heavily on debt financing. With a high degree of financial leverage come high-interest payments, which usually reduce Simmons First's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Simmons First'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. Simmons First'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 Simmons Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Simmons First's stakeholders.
For most companies, including Simmons First, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Simmons First National, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Simmons First'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 Simmons First'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 Simmons First 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 Simmons First to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Simmons First is said to be less leveraged. If creditors hold a majority of Simmons First's assets, the Company is said to be highly leveraged.
Simmons |
Simmons First Bond Ratings
Simmons First National financial ratings play a critical role in determining how much Simmons First 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 Simmons First's borrowing costs.| Piotroski F Score | 5 | Healthy | View |
| Beneish M Score | (2.45) | Unlikely Manipulator | View |
Simmons First National Debt to Cash Allocation
As Simmons First National follows its natural business cycle, the capital allocation decisions will not magically go away. Simmons First's 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.
Simmons First National currently holds 18.85 B in liabilities with Debt to Equity (D/E) ratio of 6.02, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. Note, when we think about Simmons First's use of debt, we should always consider it together with its cash and equity.
Simmons First 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 Simmons First's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Simmons First, which in turn will lower the firm's financial flexibility.Simmons First Corporate Bonds Issued
Most Simmons bonds can be classified according to their maturity, which is the date when Simmons First National 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 Simmons First Use of Financial Leverage
Simmons First's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures Simmons First's total debt position, including all outstanding debt obligations, and compares it with Simmons First's equity. Financial leverage can amplify the potential profits to Simmons First's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if Simmons First is unable to cover its debt costs.
Simmons First National Corporation operates as the holding company for Simmons Bank that provides banking and other financial products and services to individuals and businesses. Simmons First National Corporation was founded in 1903 and is headquartered in Pine Bluff, Arkansas. Simmons First operates under BanksRegional classification in the United States and is traded on NASDAQ Exchange. It employs 3206 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.When determining whether Simmons First National offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Simmons First's 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 Simmons First National Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Simmons First National Stock:Check out the analysis of Simmons First Fundamentals Over Time. You can also try the Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
Is Regional Banks 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 Simmons First. If investors know Simmons 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 Simmons First 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 Simmons First National is measured differently than its book value, which is the value of Simmons that is recorded on the company's balance sheet. Investors also form their own opinion of Simmons First's value that differs from its market value or its book value, called intrinsic value, which is Simmons First'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 Simmons First's market value can be influenced by many factors that don't directly affect Simmons First'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 Simmons First's value and its price as these two are different measures arrived at by different means. Investors typically determine if Simmons First is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Simmons First'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.