Warren Buffett famously said, 'Volatility is far from synonymous with risk.' So it seems the smart money knows that debt - which is usually involved in bankruptcies - is a very important factor, when you assess how risky a company is. We can see that Ternium S.A. (NYSE:TX) does use debt in its business. But should shareholders be worried about its use of debt?
When Is Debt A Problem?
Generally speaking, debt only becomes a real problem when a company can't easily pay it off, either by raising capital or with its own cash flow. Ultimately, if the company can't fulfill its legal obligations to repay debt, shareholders could walk away with nothing. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. Of course, plenty of companies use debt to fund growth, without any negative consequences. When we think about a company's use of debt, we first look at cash and debt together.
View our latest analysis for Ternium
What Is Ternium's Debt?
The image below, which you can click on for greater detail, shows that Ternium had debt of US$1.08b at the end of September 2022, a reduction from US$1.50b over a year. However, its balance sheet shows it holds US$2.74b in cash, so it actually has US$1.66b net cash.
NYSE:TX Debt to Equity History December 12th 2022
How Strong Is Ternium's Balance Sheet?
According to the last reported balance sheet, Ternium had liabilities of US$2.09b due within 12 months, and liabilities of US$1.56b due beyond 12 months. Offsetting this, it had US$2.74b in cash and US$2.06b in receivables that were due within 12 months. So it can boast US$1.16b more liquid assets than total liabilities.
This surplus suggests that Ternium is using debt in a way that is appears to be both safe and conservative. Given it has easily adequate short term liquidity, we don't think it will have any issues with its lenders. Succinctly put, Ternium boasts net cash, so it's fair to say it does not have a heavy debt load!
But the bad news is that Ternium has seen its EBIT plunge 12% in the last twelve months. We think hat kind of performance, if repeated frequently, could well lead to difficulties for the stock. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Ternium can strengthen its balance sheet over time. So if you're focused on the future you can check out this free report showing analyst profit forecasts.
Finally, a business needs free cash flow to pay off debt; accounting profits just don't cut it. While Ternium has net cash on its balance sheet, it's still worth taking a look at its ability to convert earnings before interest and tax (EBIT) to free cash flow, to help us understand how quickly it is building (or eroding) that cash balance. Over the most recent three years, Ternium recorded free cash flow worth 52% of its EBIT, which is around normal, given free cash flow excludes interest and tax. This free cash flow puts the company in a good position to pay down debt, when appropriate.
Summing Up
While we empathize with investors who find debt concerning, you should keep in mind that Ternium has net cash of US$1.66b, as well as more liquid assets than liabilities. So we don't have any problem with Ternium's use of debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately, every company can contain risks that exist outside of the balance sheet. Be aware that Ternium is showing 3 warning signs in our investment analysis , and 1 of those is a bit unpleasant...
When all is said and done, sometimes its easier to focus on companies that don't even need debt. Readers can access a list of growth stocks with zero net debt 100% free, right now.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
巴菲特(Warren Buffett)曾说过一句名言:波动性远非风险的代名词。因此,当你评估一家公司的风险有多大时,聪明的投资者似乎知道债务--通常涉及破产--是一个非常重要的因素。我们可以看到Ternium S.A.(纽约证券交易所代码:TX)在其业务中确实使用了债务。但股东是否应该担心它的债务使用情况?
什么时候债务是个问题?
一般来说,只有当一家公司无法轻松偿还债务时,债务才会成为一个真正的问题,无论是通过筹集资金还是用自己的现金流。最终,如果公司不能履行其偿还债务的法定义务,股东可能会一无所有地离开。然而,一种更常见(但仍然昂贵)的情况是,一家公司必须以低廉的股价稀释股东的股份,才能控制债务。当然,许多公司利用债务为增长提供资金,没有任何负面后果。当我们考虑一家公司的债务用途时,我们首先会把现金和债务放在一起看。
查看我们对Te的最新分析
Ternium的债务是什么?
下图(您可以单击查看更多详细信息)显示,截至2022年9月底,Ternium的债务为10.8亿美元,较一年内的15.亿美元有所减少。然而,其资产负债表显示,它持有27.4亿美元现金,因此它实际上拥有16.6亿美元的净现金。
纽约证券交易所:TX债转股历史2022年12月12日
Ternium的资产负债表有多强劲?
根据最近一次报告的资产负债表,Ternium有20.9亿美元的负债在12个月内到期,15.6亿美元的负债在12个月后到期。作为抵消,它有27.4亿美元的现金和20.6亿美元的应收账款在12个月内到期。因此,它可以吹嘘自己拥有的流动资产比总计负债。
这种盈余表明,Ternium正在以一种似乎既安全又保守的方式使用债务。鉴于它拥有充足的短期流动性,我们认为它与贷款人之间不会有任何问题。简而言之,Ternium拥有净现金,所以公平地说,它没有沉重的债务负担!
但坏消息是,Ternium的息税前利润在过去12个月里暴跌了12%。我们认为,这种表现,如果经常重复,很可能会导致股票陷入困境。在分析债务水平时,资产负债表显然是一个起点。但最终,该业务未来的盈利能力将决定Ternium能否随着时间的推移加强其资产负债表。所以,如果你关注未来,你可以看看这个免费显示分析师利润预测的报告。
最后,企业需要自由现金流来偿还债务;会计利润只是不能削减这一点。虽然Ternium的资产负债表上有净现金,但它将息税前收益(EBIT)转换为自由现金流的能力仍然值得一看,以帮助我们了解它正在以多快的速度建立(或侵蚀)现金余额。在最近三年中,Ternium记录的自由现金流相当于其息税前利润的52%,考虑到自由现金流不包括利息和税收,这大致是正常的。这种自由现金流使公司在适当的时候处于偿还债务的有利地位。
总结
虽然我们同情那些对债务感到担忧的投资者,但你应该记住,Ternium拥有16.6亿美元的净现金,以及比负债更多的流动资产。因此,我们对Ternium的债务使用没有任何问题。在分析债务水平时,资产负债表显然是一个起点。但归根结底,每家公司都可能包含存在于资产负债表之外的风险。注意,Ternium正在显示我们的投资分析中的3个警告信号,其中一条有点令人不快...
总而言之,有时候专注于甚至不需要债务的公司会更容易。读者可以访问净债务为零的成长型股票列表100%免费,现在。
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本文由Simply Wall St.撰写,具有概括性。我们仅使用不偏不倚的方法提供基于历史数据和分析师预测的评论,我们的文章并不打算作为财务建议。它不构成买卖任何股票的建议,也没有考虑你的目标或你的财务状况。我们的目标是为您带来由基本面数据驱动的长期重点分析。请注意,我们的分析可能不会将最新的对价格敏感的公司公告或定性材料考虑在内。Simply Wall St.对上述任何一只股票都没有持仓。