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Will Unity Bancorp (USA Stocks:UNTY) debt increase in August

July 11, 2023  By Vlad Skutelnik
Macroaxis Story
Unity Bancorp, a player in the Banks-Regional industry, presents a potential buying opportunity as its shares dip 2% amid a market uptick. Despite a decrease in cash and cash equivalents of 130M, the company maintains a healthy financial status with total assets amounting to 2.4B. Unity Bancorp's net income stands at 38.5M, bolstered by an interest income of 100.7M. The firm's operating income and EBIT are both at 62.1M, indicating efficient operations despite total operating expenses of 1.2M. The company's free cash flow is at 41.2M, with an end period cash flow of 114.8M. Unity Bancorp's forward dividend yield is 0.0201, offering investors a steady income stream. Analysts maintain a 'Buy' consensus, with an estimated target price of 28.166, suggesting room for potential upside. As Unity Bancorp navigates the current market conditions, its robust financials and promising outlook make it a stock to consider for investors. Unity Bancorp is set to announce its earnings tomorrow, with the forthcoming quarterly report expected on July 13, 2023. The Price to Earnings (P/E) Ratio of Unity Bancorp has remained relatively stable compared to the previous year, with the company reporting a P/E Ratio of 7.47 in 2022. The Price to Sales (P/S) Ratio is projected to increase to 3.26 in 2023, while the Revenue Per Employee is expected to slightly exceed $385.1K in the same year. Despite the influx of aggressive traders into the banking sector, Unity Bancorp may not necessarily be your top choice. We will assess why recent price movements in Unity Bancorp suggest a potential rebound in August.
Published over a year ago
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Reviewed by Michael Smolkin

Unity Bancorp currently holds $393.31 million in liabilities, with a Debt to Equity (D/E) ratio of 12.83. This suggests that Unity Bancorp might face challenges in generating sufficient cash to meet its financial obligations. While debt can be beneficial for Unity Bancorp in the short term, it could become problematic if the company struggles to pay it off, either through new capital or free cash flow. In such a scenario, Unity Bancorp's shareholders could potentially lose their entire investment if the company fails to meet its legal debt repayment obligations. However, a more common scenario is for companies like Unity Bancorp to issue additional shares at lower prices, thereby diluting the value of shares held by existing shareholders. In this context, debt can be a superior tool for Unity Bancorp to fund growth at high rates of return. When evaluating Unity Bancorp's use of debt, it's crucial to consider it in conjunction with the company's cash and equity positions.

Continued study

Unity Bancorp stock presents a potential buying opportunity as shares dip 2% amid market uptick. The company has a strong financial standing with a total stockholder equity of 239.2M and an end period cash flow of 114.8M. Despite a short and long term debt total of 393.3M, the bank's financial health is supported by its long term investments of 140.9M and a free cash flow of 41.2M. However, potential investors should note the company's net debt of 373.6M and a net income reported as a loss of 38.5M. The current market conditions combined with Unity Bancorp's financial health could provide an opportune moment for investment.
Unity Bancorp financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Unity Bancorp, including all of Unity 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 Unity Bancorp assets, the company is considered highly leveraged. Understanding the composition and structure of overall Unity 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 Unity Total Debt

Unity Bancorp liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Unity 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 Unity Bancorp balance sheet include debt obligations and money owed to different Unity Bancorp vendors, workers, and loan providers. Below is the chart of Unity main long-term debt accounts currently reported on its balance sheet.
You can use Unity Bancorp financial leverage analysis tool to get a better grip on understanding its financial position

How important is Unity Bancorp's Liquidity

Unity Bancorp financial leverage refers to using borrowed capital as a funding source to finance Unity Bancorp ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Unity 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 Unity 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 Unity 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 Unity Bancorp's total debt and its cash.

Unity Bancorp Gross Profit

Unity 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 Unity 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 Unity Bancorp Gross Profit growth over the last 10 years. Please check Unity Bancorp's gross profit and other fundamental indicators for more details.

Detailed Perspective On Unity Bancorp

The current indifference towards the small price fluctuations of Unity Bancorp created some momentum for investors as it was traded today as low as 22.61 and as high as 22.89 per share. The company directors and management did not add any value to Unity Bancorp investors in June. However, most investors can still diversify their portfolios with Unity Bancorp to hedge their inherited risk against high-volatility market scenarios. The stock standard deviation of daily returns for 90 days investing horizon is currently 1.84. The below-average Stock volatility is a good sign for longer-term investment options and for buy-and-hold investors.

Asset Breakdown

Total Assets2.14 Billion
Goodwill1.36 Million
Tax Assets10.53 Million
Unity Bancorp, a Banks-Regional industry player, has seen its shares dip 2% recently, presenting a potential buying opportunity for investors. With a market capitalization of 234.2M and a typical day price of $22.71, the company's stock is worth considering.
Despite a five-year return of 1.49%, the company has managed to maintain a healthy net income of $38.46M. Unity Bancorp's financial stability is further underscored by its total assets of 2.44B and total stockholder equity of $239.2M. Moreover, the company's operating income stands at $62.1M, with retained earnings contributing $157M to the total equity. Despite a change in cash of -$130M, Unity Bancorp has managed to maintain a positive free cash flow of $41.2M. Additionally, the company has a forward dividend yield of 0.0201, making it an attractive option for income-focused investors. However, investors should be mindful of the company's probability of bankruptcy at 46.16%. Despite this risk, Unity Bancorp's potential upside of 2.93 and a beta of 0.99 make it a compelling investment opportunity in the current market uptick. .

Our take on Unity Bancorp small slide

The current Treynor Ratio of Unity Bancorp has increased to 0.04, indicating a relatively higher level of systematic risk compared to the potential returns on investment. This implies that investors are receiving compensation for each unit of risk they undertake. However, considering the prevailing market conditions, we anticipate a potential decline in the price of Unity Bancorp stock. Investors should proceed with caution and take into account this risk-return trade-off before making investment decisions. Unity Bancorp exhibits relatively low volatility, with a skewness of -0.39 and a kurtosis of 2.29. Nevertheless, we recommend all investors to conduct independent research on Unity Bancorp to ensure that all available information aligns with their expectations about its upside potential and future expected returns. Understanding different market volatility trends can often assist investors in timing the market. The correct use of volatility indicators allows traders to gauge the risk of Unity Bancorp's stock against market volatility during both bullish and bearish trends.
The heightened level of volatility that accompanies bear markets can directly affect Unity Bancorp's stock price, adding stress to investors as they witness a decline in the value of their shares. This typically prompts investors to rebalance their portfolios by purchasing different stocks as prices drop. Despite the recent 2 percent dip in Unity Bancorp's stock, the analyst overall consensus remains a 'Buy'. With a valuation real value of 25.39, the stock is currently undervalued at a market value of 22.62. The analyst target price estimated value stands at 28.166, indicating a potential upside. The highest estimated target price by analysts is 31.5, offering a significant upside potential from the current market price. Given the strong buy recommendations and the potential for growth, Unity Bancorp presents an attractive investment opportunity. .

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Editorial Staff

Vlad Skutelnik is a Macroaxis Contributor. Vlad covers stocks, funds, cryptocurrencies, and ETFs that are traded in North America, focusing primarily on fundamentals, valuation and market volatility. He has many years of experience in fintech, predictive investment analytics, and risk management. 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 Vlad Skutelnik do not own shares of Unity Bancorp. Please refer to our Terms of Use for any information regarding our disclosure principles.

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