Rotten Tomato Stocks
No Result
View All Result
  • News
    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

    Twitter Faces Lawsuits Over Unpaid Rent for US HQ, UK Office

    Twitter Faces Lawsuits Over Unpaid Rent for US HQ, UK Office

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

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

    DaVita Inc. stock falls Monday, still outperforms market

    DaVita Inc. stock falls Monday, still outperforms market

    Marcus & Millichap (NYSE:MMI) Trading Down 6.3% on Analyst Downgrade

    Marcus & Millichap (NYSE:MMI) Trading Down 6.3% on Analyst Downgrade

    AmEx Profits Fall 9% as Customers Fall Behind on Payments

    AmEx Profits Fall 9% as Customers Fall Behind on Payments

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

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

    Workhorse Group Inc. stock falls Monday, underperforms market

    Workhorse Group Inc. stock falls Monday, underperforms market

    World Acceptance (NASDAQ:WRLD) Shares Gap Down After Analyst Downgrade

    World Acceptance (NASDAQ:WRLD) Shares Gap Down After Analyst Downgrade

    Here’s Why Qorvo (NASDAQ:QRVO) Can Manage Its Debt Responsibly

    Here’s Why Qorvo (NASDAQ:QRVO) Can Manage Its Debt Responsibly

  • 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
    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

    Twitter Faces Lawsuits Over Unpaid Rent for US HQ, UK Office

    Twitter Faces Lawsuits Over Unpaid Rent for US HQ, UK Office

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

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

    DaVita Inc. stock falls Monday, still outperforms market

    DaVita Inc. stock falls Monday, still outperforms market

    Marcus & Millichap (NYSE:MMI) Trading Down 6.3% on Analyst Downgrade

    Marcus & Millichap (NYSE:MMI) Trading Down 6.3% on Analyst Downgrade

    AmEx Profits Fall 9% as Customers Fall Behind on Payments

    AmEx Profits Fall 9% as Customers Fall Behind on Payments

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

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

    Workhorse Group Inc. stock falls Monday, underperforms market

    Workhorse Group Inc. stock falls Monday, underperforms market

    World Acceptance (NASDAQ:WRLD) Shares Gap Down After Analyst Downgrade

    World Acceptance (NASDAQ:WRLD) Shares Gap Down After Analyst Downgrade

    Here’s Why Qorvo (NASDAQ:QRVO) Can Manage Its Debt Responsibly

    Here’s Why Qorvo (NASDAQ:QRVO) Can Manage Its Debt Responsibly

  • 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

Evoqua Water Technologies (NYSE:AQUA) Takes On Some Risk With Its Use Of Debt

Editorial Staff by Editorial Staff
October 18, 2021
0
Evoqua Water Technologies (NYSE:AQUA) Takes On Some Risk With Its Use Of Debt

Warren Buffett famously said, ‘Volatility is far from synonymous with risk.’ 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 Evoqua Water Technologies Corp. (NYSE:AQUA) does use debt in its business. But the real question is whether this debt is making the company risky.

When Is Debt A Problem?

Debt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. 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. By replacing dilution, though, debt can be an extremely good tool for businesses that need capital to invest in growth at high rates of return. The first thing to do when considering how much debt a business uses is to look at its cash and debt together.

What Is Evoqua Water Technologies’s Debt?

You can click the graphic below for the historical numbers, but it shows that Evoqua Water Technologies had US$790.0m of debt in June 2021, down from US$870.0m, one year before. However, it does have US$144.0m in cash offsetting this, leading to net debt of about US$646.1m.

debt-equity-history-analysis
NYSE:AQUA Debt to Equity History October 15th 2021

A Look At Evoqua Water Technologies’ Liabilities

We can see from the most recent balance sheet that Evoqua Water Technologies had liabilities of US$370.7m falling due within a year, and liabilities of US$927.3m due beyond that. On the other hand, it had cash of US$144.0m and US$317.9m worth of receivables due within a year. So it has liabilities totalling US$836.1m more than its cash and near-term receivables, combined.

Of course, Evoqua Water Technologies has a market capitalization of US$4.71b, so these liabilities are probably manageable. But there are sufficient liabilities that we would certainly recommend shareholders continue to monitor the balance sheet, going forward.

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). Thus we consider debt relative to earnings both with and without depreciation and amortization expenses.

Evoqua Water Technologies has a debt to EBITDA ratio of 2.8 and its EBIT covered its interest expense 3.2 times. Taken together this implies that, while we wouldn’t want to see debt levels rise, we think it can handle its current leverage. More concerning, Evoqua Water Technologies saw its EBIT drop by 8.8% in the last twelve months. If that earnings trend continues the company will face an uphill battle to pay off its debt. 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 Evoqua Water Technologies’s ability to maintain a healthy balance sheet going forward.

Finally, a company can only pay off debt with cold hard cash, not accounting profits. So we clearly need to look at whether that EBIT is leading to corresponding free cash flow. In the last three years, Evoqua Water Technologies’s free cash flow amounted to 45% of its EBIT, less than we’d expect. That’s not great, when it comes to paying down debt.

Our View

Both Evoqua Water Technologies’s interest cover and its EBIT growth rate were discouraging. At least its level of total liabilities gives us reason to be optimistic. When we consider all the factors discussed, it seems to us that Evoqua Water Technologies is taking some risks with its use of debt. So while that leverage does boost returns on equity, we wouldn’t really want to see it increase from here. 

Related Posts

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

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

January 31, 2023
DaVita Inc. stock falls Monday, still outperforms market
NYSE

DaVita Inc. stock falls Monday, still outperforms market

January 31, 2023
Marcus & Millichap (NYSE:MMI) Trading Down 6.3% on Analyst Downgrade
NYSE

Marcus & Millichap (NYSE:MMI) Trading Down 6.3% on Analyst Downgrade

January 31, 2023
AmEx Profits Fall 9% as Customers Fall Behind on Payments
NYSE

AmEx Profits Fall 9% as Customers Fall Behind on Payments

January 30, 2023
Load More
Next Post
Stocks open lower after China slowdown as investors await earnings

Stocks open lower after China slowdown as investors await earnings

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

Vornado Realty Trust stock falls Friday, underperforms market

Vornado Realty Trust stock falls Friday, underperforms market

September 26, 2022
Analog Devices Inc. stock falls Tuesday, underperforms market

Analog Devices Inc. stock falls Tuesday, underperforms market

January 17, 2023
Is SG Blocks (NASDAQ:SGBX) Using Debt In A Risky Way?

Is SG Blocks (NASDAQ:SGBX) Using Debt In A Risky Way?

November 20, 2021
Ensign Energy Services (OTCMKTS:ESVIF) Stock Price Down 4.8%

Ensign Energy Services (OTCMKTS:ESVIF) Stock Price Down 4.8%

January 17, 2020

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

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

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

DaVita Inc. stock falls Monday, still outperforms market

POPULAR POSTS

Marcus & Millichap (NYSE:MMI) Trading Down 6.3% on Analyst Downgrade

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

Workhorse Group Inc. stock falls Monday, 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.