Here's Why Manitowoc Company (NYSE:MTW) Is Weighed Down By Its Debt Load
Here's Why Manitowoc Company (NYSE:MTW) Is Weighed Down By Its Debt Load
Legendary fund manager Li Lu (who Charlie Munger backed) once said, 'The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.' 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 note that The Manitowoc Company, Inc. (NYSE:MTW) does have debt on its balance sheet. But the real question is whether this debt is making the company risky.
When Is Debt Dangerous?
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. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. However, a more common (but still painful) scenario is that it has to raise new equity capital at a low price, thus permanently diluting shareholders. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. When we examine debt levels, we first consider both cash and debt levels, together.
View our latest analysis for Manitowoc Company
How Much Debt Does Manitowoc Company Carry?
You can click the graphic below for the historical numbers, but it shows that Manitowoc Company had US$385.6m of debt in December 2022, down from US$407.2m, one year before. However, it also had US$64.4m in cash, and so its net debt is US$321.2m.
How Strong Is Manitowoc Company's Balance Sheet?
According to the last reported balance sheet, Manitowoc Company had liabilities of US$547.8m due within 12 months, and liabilities of US$529.9m due beyond 12 months. On the other hand, it had cash of US$64.4m and US$276.9m worth of receivables due within a year. So it has liabilities totalling US$736.4m more than its cash and near-term receivables, combined.
Given this deficit is actually higher than the company's market capitalization of US$630.1m, we think shareholders really should watch Manitowoc Company's debt levels, like a parent watching their child ride a bike for the first time. Hypothetically, extremely heavy dilution would be required if the company were forced to pay down its liabilities by raising capital at the current share price.
In order to size up a company's debt relative to its earnings, we calculate its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and its earnings before interest and tax (EBIT) divided by its interest expense (its 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).
Even though Manitowoc Company's debt is only 2.2, its interest cover is really very low at 2.4. This does have us wondering if the company pays high interest because it is considered risky. Either way there's no doubt the stock is using meaningful leverage. Sadly, Manitowoc Company's EBIT actually dropped 8.3% in the last year. If that earnings trend continues then its debt load will grow heavy like the heart of a polar bear watching its sole cub. The balance sheet is clearly the area to focus on when you are analysing debt. But it is future earnings, more than anything, that will determine Manitowoc Company's ability to maintain a healthy balance sheet going forward. So if you want to see what the professionals think, you might find this free report on analyst profit forecasts to be interesting.
Finally, a company can only pay off debt with cold hard cash, not accounting profits. So we always check how much of that EBIT is translated into free cash flow. Over the last three years, Manitowoc Company recorded negative free cash flow, in total. Debt is far more risky for companies with unreliable free cash flow, so shareholders should be hoping that the past expenditure will produce free cash flow in the future.
Our View
On the face of it, Manitowoc Company's interest cover left us tentative about the stock, and its conversion of EBIT to free cash flow was no more enticing than the one empty restaurant on the busiest night of the year. Having said that, its ability handle its debt, based on its EBITDA, isn't such a worry. We're quite clear that we consider Manitowoc Company to be really rather risky, as a result of its balance sheet health. For this reason we're pretty cautious about the stock, and we think shareholders should keep a close eye on its liquidity. Given our concerns about Manitowoc Company's debt levels, it seems only prudent to check if insiders have been ditching the stock.
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.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team (at) simplywallst.com.
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.
傳奇基金經理Li·Lu曾說過,最大的投資風險不是價格的波動,而是你是否會遭受永久性的資本損失。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。我們注意到馬尼託沃克公司。(紐約證券交易所股票代碼:MTW)的資產負債表上確實有債務。但真正的問題是,這筆債務是否讓該公司面臨風險。
債務在什麼時候是危險的?
債務是幫助企業發展的一種工具,但如果一家企業無法償還貸款人的債務,那麼它就只能聽從貸款人的擺佈。在最糟糕的情況下,如果一家公司無法償還債權人的債務,它可能會破產。然而,一種更常見(但仍令人痛苦)的情景是,它不得不以低價籌集新的股本,從而永久性地稀釋股東。當然,債務的好處是,它往往代表著廉價資本,特別是當它用能夠以高回報率進行再投資的能力取代公司的稀釋時。當我們檢查債務水準時,我們首先同時考慮現金和債務水準。
查看我們對Manitowoc公司的最新分析
馬尼託瓦克公司背負著多少債務?
你可以點擊下圖查看歷史數據,但它顯示馬尼託瓦克公司在2022年12月的債務為3.856億美元,低於一年前的4.072億美元。然而,它也有6440萬美元的現金,因此其淨債務為3.212億美元。
馬尼託沃克公司的資產負債表有多強?
根據最新報告的資產負債表,Manitowoc公司有5.478億美元的債務在12個月內到期,5.299億美元的債務在12個月後到期。另一方面,它有6440萬美元的現金和價值2.769億美元的應收賬款在一年內到期。因此,該公司的負債總額為7.364億美元,比現金和近期應收賬款的總和還要多。
鑑於這一赤字實際上高於該公司6.301億美元的市值,我們認為股東們真的應該關注馬尼託瓦克公司的債務水準,就像父母第一次看孩子騎車一樣。假設,如果該公司被迫通過以當前股價籌集資金來償還債務,將需要極大的稀釋。
為了評估一家公司的債務相對於它的收益,我們計算它的淨債務除以它的利息、稅項、折舊和攤銷前收益(EBITDA)和它的利息和稅前收益(EBIT)除以它的利息支出(它的利息覆蓋)。這種方法的優點是,我們既考慮了債務的絕對數量(淨債務與EBITDA之比),也考慮了與債務相關的實際利息支出(及其利息覆蓋率)。
儘管馬尼託瓦克公司的債務只有2.2英鎊,但它的利息覆蓋率真的很低,只有2.4英鎊。這確實讓我們想知道,該公司是否因為被認為有風險而支付高額利息。無論哪種方式,毫無疑問,該股正在使用有意義的槓桿。遺憾的是,馬尼託沃克公司去年的息稅前利潤實際上下降了8.3%。如果盈利趨勢繼續下去,那麼它的債務負擔將變得沉重,就像北極熊看著自己唯一的幼崽的心臟一樣。當你分析債務時,資產負債表顯然是你關注的領域。但最重要的是,未來的收益將決定馬尼託沃克公司未來保持健康資產負債表的能力。因此,如果你想看看專業人士的想法,你可能會發現這份關於分析師利潤預測的免費報告很有趣。
最後,一家公司只能用冷硬現金償還債務,而不是會計利潤。因此,我們總是檢查EBIT中有多少轉化為自由現金流。在過去的三年中,馬尼託瓦克公司的自由現金流總額為負。對於自由現金流不可靠的公司來說,債務的風險要大得多,因此股東們應該希望過去的支出能在未來產生自由現金流。
我們的觀點
從表面上看,Manitowoc公司的利息擔保讓我們對這只股票持懷疑態度,它將息稅前利潤轉換為自由現金流並不比一年中最繁忙的夜晚的一家空蕩蕩的餐廳更具誘惑力。話雖如此,根據其EBITDA,它處理債務的能力並不是那麼令人擔憂。我們非常清楚,由於馬尼託沃克公司的資產負債表狀況良好,我們認為該公司確實相當有風險。出於這個原因,我們對該股相當謹慎,我們認為股東應該密切關注其流動性。鑑於我們對Manitowoc公司債務水準的擔憂,檢查內部人士是否一直在拋售該股似乎是唯一謹慎的做法。
歸根結底,關注那些沒有淨債務的公司往往更好。你可以訪問我們的這類公司的特別名單(都有利潤增長的記錄)。這是免費的。
對這篇文章有什麼反饋嗎?擔心內容嗎?保持聯繫直接與我們聯繫。或者,也可以給編輯組發電子郵件,地址是implywallst.com。
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。
譯文內容由第三人軟體翻譯。
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