Northeast Bancorp Debt
| NBN Stock | USD 92.49 2.65 2.95% |
Northeast Bancorp has over 365.44 Million in debt which may indicate that it relies heavily on debt financing. With a high degree of financial leverage come high-interest payments, which usually reduce Northeast Bancorp's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Northeast Bancorp'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. Northeast Bancorp'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 Northeast Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Northeast Bancorp's stakeholders.
For most companies, including Northeast Bancorp, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Northeast Bancorp, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Northeast Bancorp's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
Given that Northeast Bancorp's 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 Northeast Bancorp 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 Northeast Bancorp to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Northeast Bancorp is said to be less leveraged. If creditors hold a majority of Northeast Bancorp's assets, the Company is said to be highly leveraged.
Northeast |
Northeast Bancorp Bond Ratings
Northeast Bancorp financial ratings play a critical role in determining how much Northeast Bancorp 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 Northeast Bancorp's borrowing costs.| Piotroski F Score | 4 | Poor | View |
| Beneish M Score | (2.78) | Unlikely Manipulator | View |
Northeast Bancorp Debt to Cash Allocation
As Northeast Bancorp follows its natural business cycle, the capital allocation decisions will not magically go away. Northeast Bancorp's 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.
Northeast Bancorp has 365.44 M in debt with debt to equity (D/E) ratio of 7.46, demonstrating that the company may be unable to create cash to meet all of its financial commitments. Note however, debt could still be an excellent tool for Northeast to invest in growth at high rates of return. Northeast Bancorp 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 Northeast Bancorp's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Northeast Bancorp, which in turn will lower the firm's financial flexibility.Northeast Bancorp Corporate Bonds Issued
Northeast Bancorp 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. Northeast Bancorp 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 Northeast Bancorp Use of Financial Leverage
Leverage ratios show Northeast Bancorp'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 Northeast Bancorp'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).
Northeast Bank provides banking services to individual and corporate customers in Maine. Northeast Bank was founded in 1872 and is headquartered in Portland, Maine. Northeast Bank operates under BanksRegional classification in the United States and is traded on NASDAQ Exchange. It employs 165 people. Please read more on our technical analysis page.
When determining whether Northeast Bancorp offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Northeast Bancorp's 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 Northeast Bancorp Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Northeast Bancorp Stock: Check out the analysis of Northeast Bancorp Fundamentals Over Time. To learn how to invest in Northeast Stock, please use our How to Invest in Northeast Bancorp guide.You can also try the Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
Is Regional Banks 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 Northeast Bancorp. If investors know Northeast 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 Northeast Bancorp 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 Northeast Bancorp is measured differently than its book value, which is the value of Northeast that is recorded on the company's balance sheet. Investors also form their own opinion of Northeast Bancorp's value that differs from its market value or its book value, called intrinsic value, which is Northeast Bancorp'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 Northeast Bancorp's market value can be influenced by many factors that don't directly affect Northeast Bancorp'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 Northeast Bancorp's value and its price as these two are different measures arrived at by different means. Investors typically determine if Northeast Bancorp is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Northeast Bancorp'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.