Green Brick Partners Corporate Bonds and Leverage Analysis
| GRBK Stock | USD 54.49 0.98 1.77% |
Green Brick Partners holds a debt-to-equity ratio of 0.395. . Green Brick's financial risk is the risk to Green Brick stockholders that is caused by an increase in debt.
Asset vs Debt
Equity vs Debt
Green Brick'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. Green Brick'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 Green Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Green Brick's stakeholders.
For most companies, including Green Brick, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Green Brick Partners, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Green Brick's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Green |
Given the importance of Green Brick's capital structure, the first step in the capital decision process is for the management of Green Brick 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 Green Brick Partners to issue bonds at a reasonable cost.
Green Brick Bond Ratings
Green Brick Partners financial ratings play a critical role in determining how much Green Brick 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 Green Brick's borrowing costs.| Piotroski F Score | 4 | Poor | View |
| Beneish M Score | (2.51) | Unlikely Manipulator | View |
Green Brick Partners Debt to Cash Allocation
Green Brick Partners currently holds 354.76 M in liabilities with Debt to Equity (D/E) ratio of 0.4, which is about average as compared to similar companies. Green Brick Partners has a current ratio of 6.81, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Green Brick's use of debt, we should always consider it together with its cash and equity.Green Brick 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 Green Brick's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Green Brick, which in turn will lower the firm's financial flexibility.Green Brick Corporate Bonds Issued
Green Brick issues bonds to finance its operations. Corporate bonds make up one of the most significant components of the U.S. bond market and are considered the world's largest securities market. Green Brick Partners uses the proceeds from bond sales for a wide variety of purposes, including financing ongoing mergers and acquisitions, buying new equipment, investing in research and development, buying back their own stock, paying dividends to shareholders, and even refinancing existing debt.
Understaning Green Brick Use of Financial Leverage
Leverage ratios show Green Brick's total debt position, including all outstanding obligations. In simple terms, high financial leverage means that the cost of production, along with the day-to-day running of the business, is high. Conversely, lower financial leverage implies lower fixed cost investment in the business, which is generally considered a good sign by investors. The degree of Green Brick's financial leverage can be measured in several ways, including ratios such as the debt-to-equity ratio (total debt / total equity), or the debt ratio (total debt / total assets).
Green Brick Partners, Inc. operates as a homebuilding and land development company in the United States. Green Brick Partners, Inc. was incorporated in 2006 and is headquartered in Plano, Texas. Green Brick operates under Residential Construction classification in the United States and is traded on New York Stock Exchange. It employs 540 people. Please read more on our technical analysis page.
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Is Household Durables 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 Green Brick. If investors know Green 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 Green Brick 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 Green Brick Partners is measured differently than its book value, which is the value of Green that is recorded on the company's balance sheet. Investors also form their own opinion of Green Brick's value that differs from its market value or its book value, called intrinsic value, which is Green Brick'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 Green Brick's market value can be influenced by many factors that don't directly affect Green Brick'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 Green Brick's value and its price as these two are different measures arrived at by different means. Investors typically determine if Green Brick is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Green Brick'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.