American States Water Corporate Bonds and Leverage Analysis
| AWR Stock | USD 85.77 0.46 0.54% |
American States Water holds a debt-to-equity ratio of 0.989. At this time, American States' Short and Long Term Debt Total is relatively stable compared to the past year. As of 12/02/2024, Net Debt is likely to grow to about 949 M, while Long Term Debt Total is likely to drop slightly above 441.6 M. . American States' financial risk is the risk to American States stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
American States' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. American States' 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 American Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect American States' stakeholders.
For most companies, including American States, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for American States Water, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, American States' management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Price Book 3.6664 | Book Value 23.268 | Operating Margin 0.3422 | Profit Margin 0.1926 | Return On Assets 0.0496 |
American |
Given the importance of American States' capital structure, the first step in the capital decision process is for the management of American States 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 American States Water to issue bonds at a reasonable cost.
American States Bond Ratings
American States Water financial ratings play a critical role in determining how much American States 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 American States' borrowing costs.| Piotroski F Score | 5 | Healthy | View |
| Beneish M Score | (2.68) | Unlikely Manipulator | View |
American States Water Debt to Cash Allocation
Many companies such as American States, 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.
American States Water has 917.88 M in debt with debt to equity (D/E) ratio of 0.99, which is OK given its current industry classification. American States Water has a current ratio of 0.36, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Note however, debt could still be an excellent tool for American to invest in growth at high rates of return. American States Common Stock Shares Outstanding Over Time
American States Assets Financed by Debt
The debt-to-assets ratio shows the degree to which American States 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.American States Debt Ratio | 34.0 |
American States Corporate Bonds Issued
American Short Long Term Debt Total
Short Long Term Debt Total |
|
Understaning American States Use of Financial Leverage
American States' financial leverage ratio measures its total debt position, including all of its outstanding liabilities, and compares it to American States' current equity. If creditors own a majority of American States' assets, the company is considered highly leveraged. Understanding the composition and structure of American States' outstanding bonds gives an idea of how risky it is and if it is worth investing in.
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 917.9 M | 963.8 M | |
| Net Debt | 903.8 M | 949 M | |
| Short Term Debt | 44.2 M | 41.1 M | |
| Long Term Debt | 867.1 M | 910.4 M | |
| Long Term Debt Total | 538.8 M | 441.6 M | |
| Short and Long Term Debt | 42.4 M | 57.8 M | |
| Net Debt To EBITDA | 3.58 | 3.41 | |
| Debt To Equity | 1.17 | 0.94 | |
| Interest Debt Per Share | 25.75 | 27.04 | |
| Debt To Assets | 0.40 | 0.34 | |
| Long Term Debt To Capitalization | 0.53 | 0.45 | |
| Total Debt To Capitalization | 0.54 | 0.50 | |
| Debt Equity Ratio | 1.17 | 0.94 | |
| Debt Ratio | 0.40 | 0.34 | |
| Cash Flow To Debt Ratio | 0.07 | 0.07 |
Pair Trading with American States
One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if American States position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in American States will appreciate offsetting losses from the drop in the long position's value.Moving together with American Stock
Moving against American Stock
The ability to find closely correlated positions to American States could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace American States when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back American States - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling American States Water to buy it.
The correlation of American States is a statistical measure of how it moves in relation to other instruments. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as American States moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if American States Water moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for American States can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.Additional Tools for American Stock Analysis
When running American States' price analysis, check to measure American States' market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy American States is operating at the current time. Most of American States' value examination focuses on studying past and present price action to predict the probability of American States' future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move American States' price. Additionally, you may evaluate how the addition of American States to your portfolios can decrease your overall portfolio volatility.
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.