Terreno Realty Debt
| TRNO Stock | USD 67.86 1.05 1.57% |
Terreno Realty holds a debt-to-equity ratio of 0.346. With a high degree of financial leverage come high-interest payments, which usually reduce Terreno Realty's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
Terreno Realty'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. Terreno Realty'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 Terreno Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Terreno Realty's stakeholders.
For most companies, including Terreno Realty, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for Terreno Realty, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, Terreno Realty'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 Terreno Realty'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 Terreno Realty 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 Terreno Realty to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Terreno Realty is said to be less leveraged. If creditors hold a majority of Terreno Realty's assets, the Company is said to be highly leveraged.
Terreno |
Terreno Realty Bond Ratings
Terreno Realty financial ratings play a critical role in determining how much Terreno Realty 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 Terreno Realty's borrowing costs.| Piotroski F Score | 6 | Healthy | View |
| Beneish M Score | (2.31) | Unlikely Manipulator | View |
Terreno Realty Debt to Cash Allocation
As Terreno Realty follows its natural business cycle, the capital allocation decisions will not magically go away. Terreno Realty'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.
Terreno Realty currently holds 472.95 M in liabilities with Debt to Equity (D/E) ratio of 0.35, which is about average as compared to similar companies. Terreno Realty has a current ratio of 0.66, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Note, when we think about Terreno Realty's use of debt, we should always consider it together with its cash and equity.Terreno Realty 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 Terreno Realty's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Terreno Realty, which in turn will lower the firm's financial flexibility.Terreno Realty Corporate Bonds Issued
Terreno Realty 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. Terreno Realty 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 Terreno Realty Use of Financial Leverage
Leverage ratios show Terreno Realty'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 Terreno Realty'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).
Terreno Realty Corporation and together with its subsidiaries, the Company acquires, owns and operates industrial real estate in six major coastal U.S. markets Los Angeles, Northern New JerseyNew York City, San Francisco Bay Area, Seattle, Miami, and Washington, D.C. The Company is an internally managed Maryland corporation and elected to be taxed as a real estate investment trust under Sections 856 through 860 of the Internal Revenue Code of 1986, as amended , commencing with its taxable year ended December 31, 2010. Terreno Realty operates under REITIndustrial classification in the United States and is traded on New York Stock Exchange. It employs 34 people. Please read more on our technical analysis page.
Pair Trading with Terreno Realty
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 Terreno Realty 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 Terreno Realty will appreciate offsetting losses from the drop in the long position's value.Moving against Terreno Stock
| 0.7 | PK | Park Hotels Resorts | PairCorr |
| 0.6 | OZ | Belpointe PREP LLC | PairCorr |
| 0.5 | KW | Kennedy Wilson Holdings | PairCorr |
| 0.42 | PW | Power REIT | PairCorr |
| 0.4 | UE | Urban Edge Properties | PairCorr |
The ability to find closely correlated positions to Terreno Realty could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace Terreno Realty 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 Terreno Realty - 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 Terreno Realty to buy it.
The correlation of Terreno Realty 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 Terreno Realty moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if Terreno Realty 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 Terreno Realty 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.Check out the analysis of Terreno Realty Fundamentals Over Time. To learn how to invest in Terreno Stock, please use our How to Invest in Terreno Realty guide.You can also try the AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
Is Diversified REITs 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 Terreno Realty. If investors know Terreno 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 Terreno Realty 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 Terreno Realty is measured differently than its book value, which is the value of Terreno that is recorded on the company's balance sheet. Investors also form their own opinion of Terreno Realty's value that differs from its market value or its book value, called intrinsic value, which is Terreno Realty'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 Terreno Realty's market value can be influenced by many factors that don't directly affect Terreno Realty'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 Terreno Realty's value and its price as these two are different measures arrived at by different means. Investors typically determine if Terreno Realty is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Terreno Realty'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.