Rotten Tomato Stocks
No Result
View All Result
  • News
    Samsung’s Profit Plummets Amid Global Economic Woes

    Samsung’s Profit Plummets Amid Global Economic Woes

    Stocks Sink as Markets Brace for Big Week With Fed, Earnings

    Stocks Sink as Markets Brace for Big Week With Fed, Earnings

    Low-Cost Fashion Chain H&M Reports 4th-Quarter Loss

    Low-Cost Fashion Chain H&M Reports 4th-Quarter Loss

    Dow profit and sales fall short of estimates, aims to cut $1 billion in costs in 2023

    Dow profit and sales fall short of estimates, aims to cut $1 billion in costs in 2023

  • NYSE
    Caterpillar stock falls after profit misses expectations, while revenue beats

    Caterpillar stock falls after profit misses expectations, while revenue beats

    Ameren Corp. stock falls Tuesday, underperforms market

    Ameren Corp. stock falls Tuesday, underperforms market

    Ford Motor (NYSE:F) Short Interest Down 5.6% in January

    Ford Motor (NYSE:F) Short Interest Down 5.6% in January

    Johnson & Johnson, Chevron share losses lead Dow’s 261-point drop

    Johnson & Johnson, Chevron share losses lead Dow’s 261-point drop

  • NASDAQ
    Super Micro stock falls after weaker sales guidance for fiscal Q3

    Super Micro stock falls after weaker sales guidance for fiscal Q3

    Western Digital Corp. stock falls Tuesday, underperforms market

    Western Digital Corp. stock falls Tuesday, underperforms market

    Datadog, Inc. (NASDAQ:DDOG) Sees Large Drop in Short Interest

    Datadog, Inc. (NASDAQ:DDOG) Sees Large Drop in Short Interest

    Orchestra BioMed Down Almost 17% on Second Day of Nasdaq Trading

    Orchestra BioMed Down Almost 17% on Second Day of Nasdaq Trading

  • OTC
    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    Corus Entertainment 4Q Profit Falls

    Corus Entertainment 4Q Profit Falls

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

  • TSX
    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    Bitcoin Is Falling: Should You Buy the Dip?

    Bitcoin Is Falling: Should You Buy the Dip?

    CN Rail Stock Is So Undervalued That it’s Absurd

    CN Rail Stock Is So Undervalued That it’s Absurd

  • News
    Samsung’s Profit Plummets Amid Global Economic Woes

    Samsung’s Profit Plummets Amid Global Economic Woes

    Stocks Sink as Markets Brace for Big Week With Fed, Earnings

    Stocks Sink as Markets Brace for Big Week With Fed, Earnings

    Low-Cost Fashion Chain H&M Reports 4th-Quarter Loss

    Low-Cost Fashion Chain H&M Reports 4th-Quarter Loss

    Dow profit and sales fall short of estimates, aims to cut $1 billion in costs in 2023

    Dow profit and sales fall short of estimates, aims to cut $1 billion in costs in 2023

  • NYSE
    Caterpillar stock falls after profit misses expectations, while revenue beats

    Caterpillar stock falls after profit misses expectations, while revenue beats

    Ameren Corp. stock falls Tuesday, underperforms market

    Ameren Corp. stock falls Tuesday, underperforms market

    Ford Motor (NYSE:F) Short Interest Down 5.6% in January

    Ford Motor (NYSE:F) Short Interest Down 5.6% in January

    Johnson & Johnson, Chevron share losses lead Dow’s 261-point drop

    Johnson & Johnson, Chevron share losses lead Dow’s 261-point drop

  • NASDAQ
    Super Micro stock falls after weaker sales guidance for fiscal Q3

    Super Micro stock falls after weaker sales guidance for fiscal Q3

    Western Digital Corp. stock falls Tuesday, underperforms market

    Western Digital Corp. stock falls Tuesday, underperforms market

    Datadog, Inc. (NASDAQ:DDOG) Sees Large Drop in Short Interest

    Datadog, Inc. (NASDAQ:DDOG) Sees Large Drop in Short Interest

    Orchestra BioMed Down Almost 17% on Second Day of Nasdaq Trading

    Orchestra BioMed Down Almost 17% on Second Day of Nasdaq Trading

  • OTC
    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    China Eastern Airlines 3Q Loss Widens on Low Travel Demand

    Corus Entertainment 4Q Profit Falls

    Corus Entertainment 4Q Profit Falls

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Nintendo Co. Ltd. ADR falls Monday, still outperforms market

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

    Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

  • TSX
    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    S&P/TSX composite falls on drop in materials sector, loonie tops 81 cents US

    Bitcoin Is Falling: Should You Buy the Dip?

    Bitcoin Is Falling: Should You Buy the Dip?

    CN Rail Stock Is So Undervalued That it’s Absurd

    CN Rail Stock Is So Undervalued That it’s Absurd

No Result
View All Result
Rotten Tomato Stocks
No Result
View All Result

Does Avnet (NASDAQ:AVT) Have A Healthy Balance Sheet?

Editorial Staff by Editorial Staff
November 21, 2021
0
Does Avnet (NASDAQ:AVT) Have A Healthy Balance Sheet?

Warren Buffett famously said, ‘Volatility is far from synonymous with risk.’ So it might be obvious that you need to consider debt, when you think about how risky any given stock is, because too much debt can sink a company. We can see that Avnet, Inc. (NASDAQ:AVT) does use debt in its business. But the real question is whether this debt is making the company risky.

Why Does Debt Bring Risk?

Debt assists a business until the business has trouble paying it off, either with new capital or with free cash flow. Ultimately, if the company can’t fulfill its legal obligations to repay debt, shareholders could walk away with nothing. 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, plenty of companies use debt to fund growth, without any negative consequences. The first step when considering a company’s debt levels is to consider its cash and debt together.

What Is Avnet’s Net Debt?

The chart below, which you can click on for greater detail, shows that Avnet had US$1.39b in debt in October 2021; about the same as the year before. On the flip side, it has US$299.1m in cash leading to net debt of about US$1.09b.

debt-equity-history-analysis
NasdaqGS:AVT Debt to Equity History November 20th 2021

How Healthy Is Avnet’s Balance Sheet?

Zooming in on the latest balance sheet data, we can see that Avnet had liabilities of US$3.11b due within 12 months and liabilities of US$1.95b due beyond that. Offsetting this, it had US$299.1m in cash and US$3.72b in receivables that were due within 12 months. So its liabilities total US$1.05b more than the combination of its cash and short-term receivables.

This deficit isn’t so bad because Avnet is worth US$3.87b, and thus could probably raise enough capital to shore up its balance sheet, if the need arose. However, it is still worthwhile taking a close look at its ability to pay off debt.

We use two main ratios to inform us about debt levels relative to earnings. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). 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).

Avnet has net debt worth 1.7 times EBITDA, which isn’t too much, but its interest cover looks a bit on the low side, with EBIT at only 5.6 times the interest expense. While these numbers do not alarm us, it’s worth noting that the cost of the company’s debt is having a real impact. Pleasingly, Avnet is growing its EBIT faster than former Australian PM Bob Hawke downs a yard glass, boasting a 166% gain in the last twelve months. 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 Avnet’s ability to maintain a healthy balance sheet going forward.

Finally, while the tax-man may adore accounting profits, lenders only accept cold hard cash. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. Over the last three years, Avnet actually produced more free cash flow than EBIT. There’s nothing better than incoming cash when it comes to staying in your lenders’ good graces.

Our View

Avnet’s conversion of EBIT to free cash flow suggests it can handle its debt as easily as Cristiano Ronaldo could score a goal against an under 14’s goalkeeper. And that’s just the beginning of the good news since its EBIT growth rate is also very heartening. Zooming out, Avnet seems to use debt quite reasonably; and that gets the nod from us. After all, sensible leverage can boost returns on equity. When analysing debt levels, the balance sheet is the obvious place to start. 

Related Posts

Super Micro stock falls after weaker sales guidance for fiscal Q3
NASDAQ

Super Micro stock falls after weaker sales guidance for fiscal Q3

February 1, 2023
Western Digital Corp. stock falls Tuesday, underperforms market
NASDAQ

Western Digital Corp. stock falls Tuesday, underperforms market

February 1, 2023
Datadog, Inc. (NASDAQ:DDOG) Sees Large Drop in Short Interest
NASDAQ

Datadog, Inc. (NASDAQ:DDOG) Sees Large Drop in Short Interest

February 1, 2023
Orchestra BioMed Down Almost 17% on Second Day of Nasdaq Trading
NASDAQ

Orchestra BioMed Down Almost 17% on Second Day of Nasdaq Trading

January 31, 2023
Load More
Next Post
Is Colfax (NYSE:CFX) Using Too Much Debt?

Is Colfax (NYSE:CFX) Using Too Much Debt?

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

I agree to the Terms & Conditions and Privacy Policy.

POPULAR NEWS

CNH Industrial (NYSE:CNHI) Use Of Debt Could Be Considered Risky

CNH Industrial (NYSE:CNHI) Use Of Debt Could Be Considered Risky

April 14, 2021
CN Rail Stock Is So Undervalued That it’s Absurd

CN Rail Stock Is So Undervalued That it’s Absurd

May 2, 2021
US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

US Seeks to Fine Air Canada $25.5 Million Over Slow Refunds

June 17, 2021
Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

Ocado Group PLC Revenue of Ocado Retail in Q3 Fell 10.6%

September 14, 2021
10 Warning Signs That Should Tell You “This Stock is in Trouble”

10 Warning Signs That Should Tell You “This Stock is in Trouble”

November 11, 2019

EDITOR'S PICK

Gorilla Technology Shares Fall 17% in Continued Decline

Gorilla Technology Shares Fall 17% in Continued Decline

July 19, 2022
Asian markets fall ahead of U.S. jobs report

Asian markets fall ahead of U.S. jobs report

October 7, 2022
Rocket shares slump nearly 11% after 1Q results

Rocket shares slump nearly 11% after 1Q results

May 6, 2021
Is Kala Pharmaceuticals (NASDAQ:KALA) Using Debt Sensibly?

Is Kala Pharmaceuticals (NASDAQ:KALA) Using Debt Sensibly?

July 7, 2021

Stay Updated

Get breaking news delivered straight into your inbox

Nothing in this publication should be considered as personalized financial advice. We are not licensed under securities laws to address your particular financial situation. No communication by our employees to you should be deemed as personalized financial advice. Please consult a licensed financial advisor before making any investment decision. This is a paid advertisement and is neither an offer nor recommendation to buy or sell any security. We hold no investment licenses and are thus neither licensed nor qualified to provide investment advice. The content in this report or email is not provided to any individual with a view toward their individual circumstances. Rotten Tomato stocks is a wholly-owned subsidiary of Grainne Capital Limited.
While all information is believed to be reliable, it is not guaranteed by us to be accurate. Individuals should assume that all information contained in our newsletter is not trustworthy unless verified by their own independent research. Also, because events and circumstances frequently do not occur as expected, there will likely be differences between the any predictions and actual results. Always consult a licensed investment professional before making any investment decision. Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment.

Rotten Tomato Stocks cover the companies and markets that are declining, failing or headed for disaster. We help investors spot the down tends and recognize when something smells rotten.

RECENT POSTS

Samsung’s Profit Plummets Amid Global Economic Woes

Caterpillar stock falls after profit misses expectations, while revenue beats

Ameren Corp. stock falls Tuesday, underperforms market

POPULAR POSTS

Ford Motor (NYSE:F) Short Interest Down 5.6% in January

Super Micro stock falls after weaker sales guidance for fiscal Q3

Western Digital Corp. stock falls Tuesday, underperforms market

© Copyright 2021 RottenTomatoStocks. All Rights Reserved 

Disclaimer | Privacy Policy

No Result
View All Result
  • HOME
  • NEWS
  • NYSE
  • NASDAQ
  • OTC
  • TSX

© 2021 RottenTomatoStocks.com

error: Content is protected !!
This website uses cookies. By continuing to use this website you are giving consent to cookies being used. Visit our Privacy and Cookie Policy.