USA Compression Partners Corporate Bonds and Leverage Analysis
| USAC Stock | USD 24.28 0.45 1.89% |
USA Compression Partners has over 2.35 Billion in debt which may indicate that it relies heavily on debt financing. At present, USA Compression's Net Debt is projected to increase significantly based on the last few years of reporting. The current year's Net Debt To EBITDA is expected to grow to 5.84, whereas Short Term Debt is forecasted to decline to about 3.9 M. With a high degree of financial leverage come high-interest payments, which usually reduce USA Compression's Earnings Per Share (EPS).
Asset vs Debt
Equity vs Debt
USA Compression'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. USA Compression'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 USA Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect USA Compression's stakeholders.
For most companies, including USA Compression, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for USA Compression Partners, the most critical issue when managing liquidity is ensuring that current assets are properly aligned with current liabilities. If they are not, USA Compression's management will need to obtain alternative financing to ensure there are always enough cash equivalents on the balance sheet to meet obligations.
At present, USA Compression's Non Current Liabilities Other is projected to increase significantly based on the last few years of reporting. The current year's Change To Liabilities is expected to grow to about 9.1 M, whereas Total Current Liabilities is forecasted to decline to about 108.4 M. USA |
Given the importance of USA Compression's capital structure, the first step in the capital decision process is for the management of USA Compression 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 USA Compression Partners to issue bonds at a reasonable cost.
USA Compression Partners Debt to Cash Allocation
As USA Compression Partners follows its natural business cycle, the capital allocation decisions will not magically go away. USA Compression'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.
USA Compression Partners currently holds 2.35 B in liabilities with Debt to Equity (D/E) ratio of 4.37, indicating the company may have difficulties to generate enough cash to satisfy its financial obligations. USA Compression Partners has a current ratio of 1.02, suggesting that it may not have the ability to pay its financial obligations when due. Note, when we think about USA Compression's use of debt, we should always consider it together with its cash and equity.USA Compression Total Assets Over Time
USA Compression Assets Financed by Debt
The debt-to-assets ratio shows the degree to which USA Compression 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.USA Compression Debt Ratio | 45.0 |
USA Compression Corporate Bonds Issued
Most USA bonds can be classified according to their maturity, which is the date when USA Compression Partners 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.
USA Short Long Term Debt Total
Short Long Term Debt Total |
|
Understaning USA Compression Use of Financial Leverage
USA Compression's financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures USA Compression's total debt position, including all outstanding debt obligations, and compares it with USA Compression's equity. Financial leverage can amplify the potential profits to USA Compression's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if USA Compression is unable to cover its debt costs.
| Last Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 2.7 B | 2.8 B | |
| Net Debt | 2.7 B | 2.8 B | |
| Short Term Debt | 4.1 M | 3.9 M | |
| Long Term Debt | 2.7 B | 1.5 B | |
| Long Term Debt Total | 2.4 B | 1.4 B | |
| Short and Long Term Debt | 900.3 M | 767.9 M | |
| Net Debt To EBITDA | 5.57 | 5.84 | |
| Debt To Equity | 11.49 | 12.06 | |
| Interest Debt Per Share | 22.87 | 13.20 | |
| Debt To Assets | 0.77 | 0.45 | |
| Long Term Debt To Capitalization | 0.83 | 0.68 | |
| Total Debt To Capitalization | 0.83 | 0.68 | |
| Debt Equity Ratio | 11.49 | 12.06 | |
| Debt Ratio | 0.77 | 0.45 | |
| Cash Flow To Debt Ratio | 0.13 | 0.15 |
Also Currently Popular
Analyzing currently trending equities could be an opportunity to develop a better portfolio based on different market momentums that they can trigger. Utilizing the top trending stocks is also useful when creating a market-neutral strategy or pair trading technique involving a short or a long position in a currently trending equity.| BTC | Bitcoin | |
| TRX | TRON | |
| BNB | Binance Coin |
Check out the analysis of USA Compression Fundamentals Over Time. You can also try the Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
Is Oil & Gas Equipment & Services 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 USA Compression. If investors know USA 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 USA Compression listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth 0.44 | Dividend Share 2.1 | Earnings Share 0.55 | Revenue Per Share | Quarterly Revenue Growth 0.105 |
The market value of USA Compression Partners is measured differently than its book value, which is the value of USA that is recorded on the company's balance sheet. Investors also form their own opinion of USA Compression's value that differs from its market value or its book value, called intrinsic value, which is USA Compression'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 USA Compression's market value can be influenced by many factors that don't directly affect USA Compression'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 USA Compression's value and its price as these two are different measures arrived at by different means. Investors typically determine if USA Compression is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, USA Compression'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.