Element Solutions (NYSE:ESI) Seems To Use Debt Quite Sensibly
Element Solutions (NYSE:ESI) Seems To Use Debt Quite Sensibly
Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about... and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. We can see that Element Solutions Inc (NYSE:ESI) does use debt in its business. But the more important question is: how much risk is that debt creating?
当我们考虑一家公司的风险时,我们总是喜欢看它的债务使用情况,因为债务过载可能导致灭亡。我们可以看到Element Solutions Inc.(纽交所:ESI)在业务中确实使用了债务。但更重要的问题是:这些债务产生了多大的风险?
When Is Debt Dangerous?
债务何时有危险?
Debt is a tool to help businesses grow, but if a business is incapable of paying off its lenders, then it exists at their mercy. 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, debt can be an important tool in businesses, particularly capital heavy businesses. The first step when considering a company's debt levels is to consider its cash and debt together.
负债是帮助企业增长的工具,但如果一家企业无力偿还债权人,则存在于债权人的支配之下。最终,如果公司不能履行偿还债务的法律义务,股东可能一无所获。然而,更常见(但仍很昂贵)的情况是,一家公司必须以低廉的股价稀释股东,只为了控制负债。当然,负债可以成为企业的重要工具,特别是对于资本密集型的企业。在考虑一个公司的负债水平时,第一步是考虑其现金和债务的总和。
What Is Element Solutions's Net Debt?
Element Solutions 的净债务是多少?
You can click the graphic below for the historical numbers, but it shows that Element Solutions had US$1.93b of debt in June 2024, down from US$2.04b, one year before. However, it does have US$329.4m in cash offsetting this, leading to net debt of about US$1.60b.
您可以点击下面的图表查看历史数据,但它显示Element Solutions 在2024年6月有19.3亿美元的债务,比一年前的20.4亿美元有所减少。然而,它确实有32940万美元的现金用来抵消这笔债务,从而导致净债务约为16亿美元。
A Look At Element Solutions' Liabilities
查看element solutions的负债情况
The latest balance sheet data shows that Element Solutions had liabilities of US$372.2m due within a year, and liabilities of US$2.22b falling due after that. Offsetting this, it had US$329.4m in cash and US$480.7m in receivables that were due within 12 months. So it has liabilities totalling US$1.78b more than its cash and near-term receivables, combined.
根据最新的资产负债表数据显示,element solutions在一年内有3.722亿美元的应付负债,之后有22.2亿美元的到期负债。与此相抵,它持有3.294亿美元的现金和4.807亿美元的应收账款,这些都是在12个月内到期的。因此,它的负债总额比其现金和近期应收账款多出17.8亿美元。
Element Solutions has a market capitalization of US$6.32b, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. But it's clear that we should definitely closely examine whether it can manage its debt without dilution.
element solutions的市值为6.32亿美元,因此如果需要的话,它很有可能筹集现金来改善其资产负债表。但很明显,我们必须仔细考虑它是否能在不稀释股东权益的情况下管理好债务。
We measure a company's debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). The advantage of this approach is that we take into account both the absolute quantum of debt (with net debt to EBITDA) and the actual interest expenses associated with that debt (with its interest cover ratio).
我们通过查看净债务与利息、税、折旧和摊销前收益(EBITDA)之比以及计算其利息支出由收益前利息和税(EBIT)覆盖的程度来度量一家公司的债务负载相对于其收益能力的程度。此方法的优点在于我们同时考虑了债务的绝对量(以净债务为EBITDA)以及与该债务相关的实际利息支出(以其利息覆盖倍数计算)。
Element Solutions has a debt to EBITDA ratio of 3.3 and its EBIT covered its interest expense 5.9 times. This suggests that while the debt levels are significant, we'd stop short of calling them problematic. One way Element Solutions could vanquish its debt would be if it stops borrowing more but continues to grow EBIT at around 19%, as it did over the last year. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Element Solutions 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.
element solutions的债务与税息折旧摊销前利润(EBITDA)比率为3.3,其EBIT支持了其利息费用的5.9倍。这表明尽管债务水平相当高,但我们不会称之为有问题。element solutions摆脱债务的一种方式是停止借更多的钱,但继续以大约19%的速度增长EBIT,就像过去一年那样。在分析债务水平时,资产负债表是一个明显的起点,但最终业务未来的盈利能力将决定element solutions是否能够长期加强其资产负债表。因此,如果您关注未来情况,可以查看此免费报告,了解分析师的盈利预测。
Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So it's worth checking how much of that EBIT is backed by free cash flow. During the last three years, Element Solutions generated free cash flow amounting to a very robust 88% of its EBIT, more than we'd expect. That puts it in a very strong position to pay down debt.
最后,虽然税务部门可能喜欢会计利润,但债权人只接受冰冷的现金。所以值得检查其中有多少EBIT是由自由现金流支持的。在过去的三年中,element solutions产生的自由现金流金额相当可观,占其EBIT的88%,超出了我们的预期。这使其在偿还债务方面处于非常强势的位置。
Our View
我们的观点
Happily, Element Solutions's impressive conversion of EBIT to free cash flow implies it has the upper hand on its debt. But, on a more sombre note, we are a little concerned by its net debt to EBITDA. When we consider the range of factors above, it looks like Element Solutions is pretty sensible with its use of debt. That means they are taking on a bit more risk, in the hope of boosting shareholder returns. 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. These risks can be hard to spot. Every company has them, and we've spotted 2 warning signs for Element Solutions (of which 1 can't be ignored!) you should know about.
element solutions令人欣喜的是,其将EBIT转化为自由现金流的能力令其对债务占优势。但更为严肃的是,我们对其净债务与EBITDA之比有些担忧。综合考虑以上因素,element solutions在债务使用上相当谨慎。这意味着他们在寄望提高股东回报的同时承担了更多的风险。在分析债务水平时,资产负债表是开始的明显地方,但最终,每家公司都可能存在超出资产负债表范围的风险。这些风险很难察觉,但每家公司都会有这些风险,我们已经发现了element solutions的2个警示信号(其中一个不能忽视!)您需要了解。
At the end of the day, it's often better to focus on companies that are free from net debt. You can access our special list of such companies (all with a track record of profit growth). It's free.
归根结底,专注于没有净债务的公司往往更好。您可以访问我们的特别列表,其中包括所有表现出盈利增长轨迹的公司。这是免费的。
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