Rotten Tomato Stocks
No Result
View All Result
  • News
    Park Outside: Hyundai, Kia Recall Vehicles Due to Fire Risk

    Park Outside: Hyundai, Kia Recall Vehicles Due to Fire Risk

    Stocks Fall, Bond Yields Tumble After Fed’s Latest Rate Hike

    Stocks Fall, Bond Yields Tumble After Fed’s Latest Rate Hike

    First Majestic Shares Drop After Mining at Nevada Operation Suspended

    First Majestic Shares Drop After Mining at Nevada Operation Suspended

    Wheat Futures Fall After Export Deal Reached

    Wheat Futures Fall After Export Deal Reached

  • NYSE
    Kellogg (NYSE:K) Takes On Some Risk With Its Use Of Debt

    Kellogg (NYSE:K) Takes On Some Risk With Its Use Of Debt

    UnitedHealth Group Inc. stock falls Thursday, underperforms market

    UnitedHealth Group Inc. stock falls Thursday, underperforms market

    Chewy stock dips as earnings show shrinking customer count, forecast of no profit growth

    Chewy stock dips as earnings show shrinking customer count, forecast of no profit growth

    Nike stock turns lower, as enduring costs, markdowns weigh on margins

    Nike stock turns lower, as enduring costs, markdowns weigh on margins

  • NASDAQ
    Cidara Therapeutics Down 3% After Hours Following FDA Approval

    Cidara Therapeutics Down 3% After Hours Following FDA Approval

    Xerox Holdings Corp. stock falls Thursday, underperforms market

    Xerox Holdings Corp. stock falls Thursday, underperforms market

    Mineralys Therapeutics (NASDAQ:MLYS) Reaches New 52-Week Low After Analyst Downgrade

    Mineralys Therapeutics (NASDAQ:MLYS) Reaches New 52-Week Low After Analyst Downgrade

    Petco Shares Sink 13% After Issuing FY23 Guidance

    Petco Shares Sink 13% After Issuing FY23 Guidance

  • 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
    Park Outside: Hyundai, Kia Recall Vehicles Due to Fire Risk

    Park Outside: Hyundai, Kia Recall Vehicles Due to Fire Risk

    Stocks Fall, Bond Yields Tumble After Fed’s Latest Rate Hike

    Stocks Fall, Bond Yields Tumble After Fed’s Latest Rate Hike

    First Majestic Shares Drop After Mining at Nevada Operation Suspended

    First Majestic Shares Drop After Mining at Nevada Operation Suspended

    Wheat Futures Fall After Export Deal Reached

    Wheat Futures Fall After Export Deal Reached

  • NYSE
    Kellogg (NYSE:K) Takes On Some Risk With Its Use Of Debt

    Kellogg (NYSE:K) Takes On Some Risk With Its Use Of Debt

    UnitedHealth Group Inc. stock falls Thursday, underperforms market

    UnitedHealth Group Inc. stock falls Thursday, underperforms market

    Chewy stock dips as earnings show shrinking customer count, forecast of no profit growth

    Chewy stock dips as earnings show shrinking customer count, forecast of no profit growth

    Nike stock turns lower, as enduring costs, markdowns weigh on margins

    Nike stock turns lower, as enduring costs, markdowns weigh on margins

  • NASDAQ
    Cidara Therapeutics Down 3% After Hours Following FDA Approval

    Cidara Therapeutics Down 3% After Hours Following FDA Approval

    Xerox Holdings Corp. stock falls Thursday, underperforms market

    Xerox Holdings Corp. stock falls Thursday, underperforms market

    Mineralys Therapeutics (NASDAQ:MLYS) Reaches New 52-Week Low After Analyst Downgrade

    Mineralys Therapeutics (NASDAQ:MLYS) Reaches New 52-Week Low After Analyst Downgrade

    Petco Shares Sink 13% After Issuing FY23 Guidance

    Petco Shares Sink 13% After Issuing FY23 Guidance

  • 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

Here’s Why Global Ship Lease (NYSE:GSL) Has A Meaningful Debt Burden

Editorial Staff by Editorial Staff
January 5, 2022
0
Here’s Why Global Ship Lease (NYSE:GSL) Has A Meaningful Debt Burden

Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett famously said that ‘Volatility is far from synonymous with risk.’ It’s only natural to consider a company’s balance sheet when you examine how risky it is, since debt is often involved when a business collapses. We can see that Global Ship Lease, Inc. (NYSE:GSL) does use debt in its business. But the real question is whether this debt is making the company risky.

What Risk Does Debt Bring?

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. Having said that, the most common situation is where a company manages its debt reasonably well – and to its own advantage. When we examine debt levels, we first consider both cash and debt levels, together.

How Much Debt Does Global Ship Lease Carry?

You can click the graphic below for the historical numbers, but it shows that as of September 2021 Global Ship Lease had US$1.08b of debt, an increase on US$816.8m, over one year. However, it does have US$81.9m in cash offsetting this, leading to net debt of about US$995.5m.

debt-equity-history-analysis
NYSE:GSL Debt to Equity History January 5th 2022

How Healthy Is Global Ship Lease’s Balance Sheet?

According to the last reported balance sheet, Global Ship Lease had liabilities of US$195.3m due within 12 months, and liabilities of US$996.5m due beyond 12 months. Offsetting these obligations, it had cash of US$81.9m as well as receivables valued at US$4.92m due within 12 months. So it has liabilities totalling US$1.10b more than its cash and near-term receivables, combined.

Given this deficit is actually higher than the company’s market capitalization of US$840.6m, we think shareholders really should watch Global Ship Lease’s debt levels, like a parent watching their child ride a bike for the first time. In the scenario where the company had to clean up its balance sheet quickly, it seems likely shareholders would suffer extensive dilution.

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). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Global Ship Lease has a rather high debt to EBITDA ratio of 5.1 which suggests a meaningful debt load. But the good news is that it boasts fairly comforting interest cover of 3.0 times, suggesting it can responsibly service its obligations. The good news is that Global Ship Lease grew its EBIT a smooth 51% over the last twelve months. Like a mother’s loving embrace of a newborn that sort of growth builds resilience, putting the company in a stronger position to manage its debt. When analysing debt levels, the balance sheet is the obvious place to start. But ultimately the future profitability of the business will decide if Global Ship Lease can strengthen its balance sheet over time.

But our final consideration is also important, because a company cannot pay debt with paper profits; it needs cold hard cash. So it’s worth checking how much of that EBIT is backed by free cash flow. During the last three years, Global Ship Lease burned a lot of cash. While investors are no doubt expecting a reversal of that situation in due course, it clearly does mean its use of debt is more risky.

Our View

On the face of it, Global Ship Lease’s level of total liabilities 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. But at least it’s pretty decent at growing its EBIT; that’s encouraging. We’re quite clear that we consider Global Ship Lease 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. The balance sheet is clearly the area to focus on when you are analysing debt. 

Related Posts

Kellogg (NYSE:K) Takes On Some Risk With Its Use Of Debt
NYSE

Kellogg (NYSE:K) Takes On Some Risk With Its Use Of Debt

March 24, 2023
UnitedHealth Group Inc. stock falls Thursday, underperforms market
NYSE

UnitedHealth Group Inc. stock falls Thursday, underperforms market

March 24, 2023
Chewy stock dips as earnings show shrinking customer count, forecast of no profit growth
NYSE

Chewy stock dips as earnings show shrinking customer count, forecast of no profit growth

March 24, 2023
Nike stock turns lower, as enduring costs, markdowns weigh on margins
NYSE

Nike stock turns lower, as enduring costs, markdowns weigh on margins

March 22, 2023
Load More
Next Post
Is Avalara (NYSE:AVLR) Weighed On By Its Debt Load?

Is Avalara (NYSE:AVLR) Weighed On By Its Debt Load?

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

Qualcomm forecast falls short on weakening handset sales; Samsung agreement extended

Qualcomm forecast falls short on weakening handset sales; Samsung agreement extended

July 28, 2022
Japan’s economy shrank an annualized 3.9% in first quarter

Japan’s economy shrank an annualized 3.9% in first quarter

June 8, 2021
Reinsurance Group of America (NYSE:RGA) Stock Rating Lowered by StockNews.com

Reinsurance Group of America (NYSE:RGA) Stock Rating Lowered by StockNews.com

March 2, 2023
Is Trimble (NASDAQ:TRMB) Using Too Much Debt?

Is Trimble (NASDAQ:TRMB) Using Too Much Debt?

October 19, 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

Park Outside: Hyundai, Kia Recall Vehicles Due to Fire Risk

Kellogg (NYSE:K) Takes On Some Risk With Its Use Of Debt

UnitedHealth Group Inc. stock falls Thursday, underperforms market

POPULAR POSTS

Chewy stock dips as earnings show shrinking customer count, forecast of no profit growth

Cidara Therapeutics Down 3% After Hours Following FDA Approval

Xerox Holdings Corp. stock falls Thursday, underperforms market

© Copyright 2023 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.