Every cloud has a silver lining, and for Xcel Brands (NASDAQ: XELB), a player in the Apparel Manufacturing industry, the potential for a financial turnaround is in sight. Despite reporting a loss in retained earnings of $53.8M and a drop in cash flow to $3M, Xcel Brands' resilience is evident in its total revenue of $17.8M. With a market valuation of $0.76 and the highest estimated target price from analysts standing at $5.55, the company is showing signs of a possible recovery. The analyst consensus remains a 'Strong Buy', hinting at an optimistic outlook for the company's financial performance by June. Xcel Brands is set to announce its earnings today. Currently, the company's Price-to-Book (P/B) ratio is predicted to rise, reflecting its financial reports from recent years. The Average Payables for the current year is projected to increase to approximately $1.5 million, while the Market Capitalization is expected to decrease to roughly $17.1 million. Despite the increasing number of aggressive traders venturing into the specialty retail sector, Xcel Brands may not necessarily be your top investment choice.
Xcel Brands financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Xcel Brands, including all of Xcel Brands's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Xcel Brands assets, the company is considered highly leveraged. Understanding the
composition and structure of overall Xcel Brands debt and outstanding corporate bonds gives a good idea of
how risky the capital structure of a business is and if it is worth investing in it. Please read more on our
technical analysis page.
Watch out for price decline
Please consider monitoring Xcel Brands on a daily basis if you are holding a position in it. Xcel Brands is trading at a penny-stock level, and the possibility of delisting is much higher compared to other stocks. However, just because the stock is trading under one dollar, does not mean it will be marked for deletion.
Most exchanges require public instruments, such as Xcel Brands stock to be traded above the $1 level to remain listed. If Xcel Brands stock price falls below $1 for 30 consecutive trading days, the exchange can delist it. Once the company reaches this point, they will be sent an initial price violation notice directly from an exchange.
Understanding Xcel Total Debt
Xcel Brands liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Xcel Brands has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Xcel Brands balance sheet include debt obligations and money owed to different Xcel Brands vendors, workers, and loan providers. Below is the chart of Xcel main long-term debt accounts currently reported on its balance sheet.
You can use Xcel Brands
financial leverage analysis tool to get a better grip on understanding its financial position
How important is Xcel Brands's Liquidity
Xcel Brands
financial leverage refers to using borrowed capital as a funding source to finance Xcel Brands ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Xcel Brands financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Xcel Brands' owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Xcel Brands' 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). Please check the
breakdown between Xcel Brands's total debt and its cash.
An Additional Perspective On Xcel Brands
The firm reported the previous year's revenue of 17.75
M. Net Loss for the year was (21.05
M) with profit before overhead, payroll, taxes, and interest of 17.8
M.
Asset Breakdown
21.9 M
Net Tangible Assets
| Total Assets | 69.93 Million |
| Total Current Assets | 9.85 Million |
| Other Current Assets | 633,463 |
| Non Current Assets Total | 75.9 Million |
| Non Currrent Assets Other | 14,250 |
| Intangible Assets | 65.62 Million |
| Net Tangible Assets | 21.88 Million |
| Other Assets | 2.53 Million |
"Never count your chickens before they're hatched," is a common adage that rings true for Xcel Brands (XELB).
Despite a high probability of bankruptcy at 62.40%, the company's financial leverage shows potential for a turnaround by June. Xcel Brands' market capitalization stands at $17.74M, with total assets amounting to $74.9M, indicating a solid asset base. However, the company's operating income reflects a loss of $19.3M, and free cash flow is also in the negative at $6.6M. The turnaround will heavily depend on the company's ability to reduce its operating expenses, currently at $13.4M, and increase its gross profit, which is presently at $17.8M..
Can Xcel Brands build up on the current rise?
Xcel Brands' stock, with a standard deviation of 5.15, demonstrates significant volatility, suggesting a wide spread of prices and potential for high returns. Strategic navigation of this volatility could allow the company to capitalize on its current rise. However, investing requires careful monitoring of stock performance and market trends. Despite being a potential penny stock, Xcel Brands may be a sound investment, although penny stocks often carry speculative and artificial price hype risks. We advise investors to be cautious of signs such as email spam, unreported promotions, and sudden news releases. It's also prudent to research the professional history of company officers before investing in high volatility instruments, penny stocks, or microcap equities.
Timing is key when investing in Xcel Brands - although penny stocks may see a short-term rise in share price due to artificial hype, sustainable shareholder value only comes from solid performance and strong fundamentals.In conclusion, Xcel Brands is showing promising potential for a strong retake in June. With an analyst overall consensus of a
Strong Buy, and the highest estimated target price reaching
$5.55, the company's stock is poised for significant growth. The possible upside price of
$5.99 further reinforces this potential. However, investors should also consider the possible downside price of $0.0076. Given the current valuation market value of $0.76, which is closely aligned with the naive expected forecast value, Xcel Brands presents an attractive investment opportunity. With careful consideration of these factors, investors can make informed decisions about their investments in Xcel Brands..
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Ellen Johnson is a Member of Macroaxis Editorial Board. Ellen covers public companies in North America, focusing primarily on valuation and volatility. Six years of experience in predictive investment analytics and risk management.
View Profile This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Ellen Johnson do not own shares of Xcel Brands. Please refer to our
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