Digital Brands Debt
| DBGI Stock | USD 3.69 0.16 4.16% |
Digital Brands' financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. Digital Brands' financial risk is the risk to Digital Brands stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Given that Digital Brands' 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 Digital Brands 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 Digital Brands to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Digital Brands is said to be less leveraged. If creditors hold a majority of Digital Brands' assets, the Company is said to be highly leveraged.
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Digital Brands Bond Ratings
Digital Brands Group financial ratings play a critical role in determining how much Digital Brands 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 Digital Brands' borrowing costs.| Piotroski F Score | 3 | Frail | View |
| Beneish M Score | (1.00) | Possible Manipulator | View |
Digital Brands Group Debt to Cash Allocation
As Digital Brands Group follows its natural business cycle, the capital allocation decisions will not magically go away. Digital Brands' 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.
Digital Brands Group currently holds 8.67 M in liabilities. Digital Brands Group has a current ratio of 0.13, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Note, when we think about Digital Brands' use of debt, we should always consider it together with its cash and equity.Digital Brands 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 Digital Brands' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Digital Brands, which in turn will lower the firm's financial flexibility.Digital Brands Corporate Bonds Issued
Most Digital bonds can be classified according to their maturity, which is the date when Digital Brands 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 Digital Brands Use of Financial Leverage
Understanding the composition and structure of Digital Brands' 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 Digital 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).
Digital Brands Group, Inc. provides apparel under various brands on direct-to-consumer and wholesale basis. Digital Brands Group, Inc. was incorporated in 2012 and is headquartered in Austin, Texas. Digital Brands operates under Apparel Retail classification in the United States and is traded on NASDAQ Exchange. It employs 58 people. Please read more on our technical analysis page.
Currently Active Assets on Macroaxis
When determining whether Digital Brands Group is a strong investment it is important to analyze Digital Brands' competitive position within its industry, examining market share, product or service uniqueness, and competitive advantages. Beyond financials and market position, potential investors should also consider broader economic conditions, industry trends, and any regulatory or geopolitical factors that may impact Digital Brands' future performance. For an informed investment choice regarding Digital Stock, refer to the following important reports:Check out the analysis of Digital Brands Fundamentals Over Time. You can also try the Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Is Specialty Retail 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 Digital Brands. If investors know Digital 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 Digital Brands 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 Digital Brands Group is measured differently than its book value, which is the value of Digital that is recorded on the company's balance sheet. Investors also form their own opinion of Digital Brands' value that differs from its market value or its book value, called intrinsic value, which is Digital Brands' 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 Digital Brands' market value can be influenced by many factors that don't directly affect Digital Brands' 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 Digital Brands' value and its price as these two are different measures arrived at by different means. Investors typically determine if Digital Brands is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Digital Brands' 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.