YETI Holdings Corporate Bonds and Leverage Analysis
| YETI Stock | USD 40.33 0.51 1.28% |
YETI Holdings holds a debt-to-equity ratio of 0.351. With a high degree of financial leverage come high-interest payments, which usually reduce YETI Holdings' Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
YETI Holdings' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. YETI Holdings' 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 YETI Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect YETI Holdings' stakeholders.
For most companies, including YETI Holdings, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for YETI Holdings, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, YETI Holdings' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
YETI |
Given the importance of YETI Holdings' capital structure, the first step in the capital decision process is for the management of YETI Holdings 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 YETI Holdings to issue bonds at a reasonable cost.
YETI Holdings Debt to Cash Allocation
As YETI Holdings follows its natural business cycle, the capital allocation decisions will not magically go away. YETI Holdings' 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.
YETI Holdings currently holds 176.11 M in liabilities with Debt to Equity (D/E) ratio of 0.35, which is about average as compared to similar companies. YETI Holdings has a current ratio of 1.79, which is within standard range for the sector. Note, when we think about YETI Holdings' use of debt, we should always consider it together with its cash and equity.YETI Holdings 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 YETI Holdings' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of YETI Holdings, which in turn will lower the firm's financial flexibility.YETI Holdings Corporate Bonds Issued
Most YETI bonds can be classified according to their maturity, which is the date when YETI Holdings 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 YETI Holdings Use of Financial Leverage
Understanding the composition and structure of YETI Holdings' 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 YETI Holdings' 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).
YETI Holdings, Inc. designs, markets, retails, and distributes products for the outdoor and recreation market under the YETI brand. YETI Holdings, Inc. was founded in 2006 and is headquartered in Austin, Texas. Yeti Holdings operates under Leisure classification in the United States and is traded on New York Stock Exchange. It employs 823 people. Please read more on our technical analysis page.
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When determining whether YETI Holdings offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of YETI Holdings' 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 Yeti Holdings Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Yeti Holdings Stock:Check out the analysis of YETI Holdings Fundamentals Over Time. For more detail on how to invest in YETI Stock please use our How to Invest in YETI Holdings guide.You can also try the Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
Is Recreation 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 YETI Holdings. If investors know YETI 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 YETI Holdings 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 YETI Holdings is measured differently than its book value, which is the value of YETI that is recorded on the company's balance sheet. Investors also form their own opinion of YETI Holdings' value that differs from its market value or its book value, called intrinsic value, which is YETI Holdings' 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 YETI Holdings' market value can be influenced by many factors that don't directly affect YETI Holdings' 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 YETI Holdings' value and its price as these two are different measures arrived at by different means. Investors typically determine if YETI Holdings is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, YETI Holdings' 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.