Macroaxis Stories

How much will Capital Bancorp owe in August?

July 27, 2023  By Rifka Kats
Macroaxis Story
Despite Capital Bancorp's (NASDAQ: CBNK) current short and long-term debt obligations totaling 129.1M, the bank's robust financial health, reflected in its end period cash flow of 80.4M and net tangible assets of 224M, suggests that it remains a promising investment opportunity. The bank's total revenue stands at 170M, bolstered by an EBIT of 64.3M and a healthy EBITDA of 65.7M. The bank's forward dividend rate of 0.24 and yield of 0.012 further enhance its appeal to investors seeking regular income. Despite a negative investment figure of 299.3M, the bank's long-term investments amount to a substantial 252.5M, indicating a strategic focus on growth. The bank's common stock total equity is 141K, with 14.4M shares outstanding. The estimated target price stands at 20.625, with the lowest estimate at 18, offering a decent upside potential from the naive expected forecast value of 21.22. The bank's free cash flow of 49.8M provides further reassurance of its ability to meet its debt obligations. Therefore, maintaining your position in Capital Bancorp could prove beneficial in the long run. Capital Bancorp is set to announce its earnings today, with the subsequent financial report anticipated on October 19, 2023. The EBITDA Margin of Capital Bancorp is currently relatively stable compared to the previous year. The company's present EBITDA Margin is estimated at 0.35. The Price to Book Value is projected to increase to 1.64 this year, although the value of Average Assets is likely to decrease to approximately 2.1 billion. While many traders may be overly focused on analyzing the banking sector, it is rational to consider Capital Bancorp as an alternative investment option.
Published over a year ago
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Reviewed by Vlad Skutelnik

Investing in Capital Bancorp (USA Stocks: CBNK) presents a promising opportunity despite its current debt obligations. The company has a substantial total liability of 1.9B, but it's important to note that it also has a significant total asset base of 2.1B. This indicates that the company has the assets to cover its liabilities, which is a positive sign for investors. Furthermore, the company's operating income stands at 64.3M, which is a healthy figure and shows that the company is generating a good amount of profit from its operations. From a leverage viewpoint, the company's net invested capital is 343.1M, which is a substantial amount. This indicates that the company is effectively using its capital to generate profits. Moreover, the company's free cash flow is 49.8M, which shows that the company has a good amount of cash that it can use to pay off its debts, invest in new projects, or return to shareholders. In terms of risk, the company's Sortino Ratio is 0.1197. This is a measure of the risk-adjusted return of an investment or portfolio. A higher Sortino Ratio indicates a lower probability of a large loss, which is a positive sign for investors. In conclusion, despite Capital Bancorp's current debt obligations, it is a promising investment opportunity. The company has a strong asset base, is generating a good amount of profit from its operations, and has a low probability of a large loss. Therefore, investors should maintain their position in Capital Bancorp.

Further analysis

The company, Capital Bancorp, currently has $129.06 million in liabilities, with a Debt to Equity (D/E) ratio of 6.6. This suggests that Capital Bancorp may face challenges in generating sufficient cash to meet its financial obligations. While debt can be beneficial for Capital Bancorp until it encounters difficulties in repayment, either through new capital or free cash flow, there is a risk that shareholders could end up with nothing if the company fails to meet its legal debt repayment obligations. However, a more common scenario is when companies like Capital Bancorp issue additional shares at discounted prices, which dilutes the value for existing shareholders. In this context, debt can be an excellent tool for Capital Bancorp to invest in growth at high rates of return. When evaluating Capital Bancorp's use of debt, it is crucial to consider it in conjunction with cash and equity.
Capital Bancorp financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Capital Bancorp, including all of Capital Bancorp's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Capital Bancorp assets, the company is considered highly leveraged. Understanding the composition and structure of overall Capital Bancorp debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding Capital Total Liabilities

Capital Bancorp liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Capital Bancorp has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Capital Bancorp balance sheet include debt obligations and money owed to different Capital Bancorp vendors, workers, and loan providers. Below is the chart of Capital short long-term liabilities accounts currently reported on its balance sheet.
You can use Capital Bancorp financial leverage analysis tool to get a better grip on understanding its financial position

How important is Capital Bancorp's Liquidity

Capital Bancorp financial leverage refers to using borrowed capital as a funding source to finance Capital Bancorp ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Capital Bancorp financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Capital Bancorp's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Capital Bancorp's 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). Please check the breakdown between Capital Bancorp's total debt and its cash.

Capital Bancorp Gross Profit

Capital Bancorp Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Capital Bancorp previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Capital Bancorp Gross Profit growth over the last 10 years. Please check Capital Bancorp's gross profit and other fundamental indicators for more details.

Breaking it down a bit more

The company reported the previous year's revenue of 169.98 M. Net Income was 41.8 M with profit before overhead, payroll, taxes, and interest of 163.35 M. Capital Bancorp (NASDAQ: CBNK) continues to demonstrate a promising investment opportunity despite its current debt obligations. With a Total Debt of 129.06M, the company has effectively leveraged its Net Borrowings of 85M to generate a significant EBITDA of 65.7M. This is further accentuated by the company's Operating Income of 64.3M, indicating robust operational efficiency. The company's financial health is also reflected in its Total Cash From Operating Activities, which stands at 51.4M.
This is complemented by a Common Stock Total Equity of 141K and a Book Value Per Share of 16.65X. The company's Profit Margin of 0.26% and Net Income Applicable To Common Shares of 41.8M are indicative of its ability to generate profits consistently. Furthermore, with a Beta of 0.49, Capital Bancorp exhibits lower volatility compared to the market, making it a relatively stable investment. Finally, the company's Forward Dividend Yield of 0.012 and Last Dividend Paid of 0.24, along with a Target Price of 21.1, demonstrate its potential for providing shareholders with attractive returns. Therefore, despite the company's debt obligations, maintaining a position in Capital Bancorp could prove to be a promising investment decision. .

Our take on today Capital Bancorp rise

Despite today's increase in Capital Bancorp's stock, investors are advised to proceed with caution. The company's Sortino ratio, a statistical metric used to gauge risk-adjusted return, has fallen to 0.12. This decrease could potentially signal an impending volatility downturn. Although the stock's current performance appears encouraging, this inherent risk factor implies that the upward trend may not be sustainable. Investors should closely observe the situation and make decisions that align with their risk tolerance and investment objectives. Capital Bancorp exhibits relatively low volatility, with a skewness of 0.91 and a kurtosis of 1.44. Nonetheless, we recommend all investors to conduct independent research on Capital Bancorp to ensure all available information aligns with their expectations regarding its upside potential and anticipated future returns. Understanding various market volatility trends often assists investors in timing the market. Proper utilization of volatility indicators allows traders to compare Capital Bancorp's stock risk against market volatility during both bullish and bearish trends.
The heightened level of volatility that accompanies bear markets can directly affect Capital Bancorp's stock price, adding stress for investors as they witness their share values decline. This typically compels investors to rebalance their portfolios by purchasing different stocks as prices drop. In conclusion, the current market dynamics suggest a promising outlook for Capital Bancorp (USA Stocks: CBNK) as we move into August. With a Valuation Real Value of 21.35 and a Naive Expected Forecast Value of 21.22, the stock shows potential for a healthy upside. The Analyst Overall Consensus is a 'Buy', supported by 3 Strong Buys and 2 Holds. The possible Upside Price of 23.35 further bolsters this optimistic view. However, investors should also consider the possible Downside Price of 19.09 and the Analyst Lowest Estimated Target Price of 18. Given these factors, it's advisable for investors to closely monitor the stock's performance in the coming month. .

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Editorial Staff

Rifka Kats is a Member of Macroaxis Editorial Board. Rifka writes about retail product and service companies from the perspective of a regular consumer and sophisticated investor at the same time. She is passionate about corporate ethics and equality in the workforce. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of Capital Bancorp. Please refer to our Terms of Use for any information regarding our disclosure principles.

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