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)曾説過一句名言:波動性遠非風險的代名詞。因此,當你評估一家公司的風險有多大時,聰明的投資者似乎知道債務--通常涉及破產--是一個非常重要的因素。我們可以看到Ternium S.A.(紐約證券交易所代碼:TX)在其業務中確實使用了債務。但股東是否應該擔心它的債務使用情況?
什麼時候債務是個問題?
一般來説,只有當一家公司無法輕鬆償還債務時,債務才會成為一個真正的問題,無論是通過籌集資金還是用自己的現金流。最終,如果公司不能履行其償還債務的法定義務,股東可能會一無所有地離開。然而,一種更常見(但仍然昂貴)的情況是,一家公司必須以低廉的股價稀釋股東的股份,才能控制債務。當然,許多公司利用債務為增長提供資金,沒有任何負面後果。當我們考慮一家公司的債務用途時,我們首先會把現金和債務放在一起看。
查看我們對Te的最新分析
Ternium的債務是什麼?
下圖(您可以單擊查看更多詳細信息)顯示,截至2022年9月底,Ternium的債務為10.8億美元,較一年內的15.億美元有所減少。然而,其資產負債表顯示,它持有27.4億美元現金,因此它實際上擁有16.6億美元的淨現金。
紐約證券交易所:TX債轉股歷史2022年12月12日
Ternium的資產負債表有多強勁?
根據最近一次報告的資產負債表,Ternium有20.9億美元的負債在12個月內到期,15.6億美元的負債在12個月後到期。作為抵消,它有27.4億美元的現金和20.6億美元的應收賬款在12個月內到期。因此,它可以吹噓自己擁有的流動資產比總計負債。
這種盈餘表明,Ternium正在以一種似乎既安全又保守的方式使用債務。鑑於它擁有充足的短期流動性,我們認為它與貸款人之間不會有任何問題。簡而言之,Ternium擁有淨現金,所以公平地説,它沒有沉重的債務負擔!
但壞消息是,Ternium的息税前利潤在過去12個月裏暴跌了12%。我們認為,這種表現,如果經常重複,很可能會導致股票陷入困境。在分析債務水平時,資產負債表顯然是一個起點。但最終,該業務未來的盈利能力將決定Ternium能否隨着時間的推移加強其資產負債表。所以,如果你關注未來,你可以看看這個免費顯示分析師利潤預測的報告。
最後,企業需要自由現金流來償還債務;會計利潤只是不能削減這一點。雖然Ternium的資產負債表上有淨現金,但它將息税前收益(EBIT)轉換為自由現金流的能力仍然值得一看,以幫助我們瞭解它正在以多快的速度建立(或侵蝕)現金餘額。在最近三年中,Ternium記錄的自由現金流相當於其息税前利潤的52%,考慮到自由現金流不包括利息和税收,這大致是正常的。這種自由現金流使公司在適當的時候處於償還債務的有利地位。
總結
雖然我們同情那些對債務感到擔憂的投資者,但你應該記住,Ternium擁有16.6億美元的淨現金,以及比負債更多的流動資產。因此,我們對Ternium的債務使用沒有任何問題。在分析債務水平時,資產負債表顯然是一個起點。但歸根結底,每家公司都可能包含存在於資產負債表之外的風險。注意,Ternium正在顯示我們的投資分析中的3個警告信號,其中一條有點令人不快...
總而言之,有時候專注於甚至不需要債務的公司會更容易。讀者可以訪問淨債務為零的成長型股票列表100%免費,現在。
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本文由Simply Wall St.撰寫,具有概括性。我們僅使用不偏不倚的方法提供基於歷史數據和分析師預測的評論,我們的文章並不打算作為財務建議。它不構成買賣任何股票的建議,也沒有考慮你的目標或你的財務狀況。我們的目標是為您帶來由基本面數據驅動的長期重點分析。請注意,我們的分析可能不會將最新的對價格敏感的公司公告或定性材料考慮在內。Simply Wall St.對上述任何一隻股票都沒有持倉。