Rotten Tomato Stocks
No Result
View All Result
  • News
    Vizio Swings to 1Q on Decline in Device Sales

    Vizio Swings to 1Q on Decline in Device Sales

    High Inflation Leaves Food Banks Struggling to Meet Needs

    High Inflation Leaves Food Banks Struggling to Meet Needs

    Nintendo’s Profit Dips Slightly as Switch Console Sales Slow

    Nintendo’s Profit Dips Slightly as Switch Console Sales Slow

    Wall Street’s Losses Worsen as Markets Tumble Worldwide

    Wall Street’s Losses Worsen as Markets Tumble Worldwide

  • NYSE
    Clean Harbors (NYSE:CLH) Downgraded by StockNews.com

    Clean Harbors (NYSE:CLH) Downgraded by StockNews.com

    Wells Fargo & Co. stock falls Thursday, underperforms market

    Wells Fargo & Co. stock falls Thursday, underperforms market

    Boeing, American Express share losses contribute to Dow’s 240-point drop

    Boeing, American Express share losses contribute to Dow’s 240-point drop

    Dutch Bros. stock spills 37% lower after forecast cut due to inflation

    Dutch Bros. stock spills 37% lower after forecast cut due to inflation

  • NASDAQ
    Tesla, Twitter Shares Drop as Elon Musk’s Legal Issues Grow

    Tesla, Twitter Shares Drop as Elon Musk’s Legal Issues Grow

    Cisco Systems Inc. stock falls Thursday, underperforms market

    Cisco Systems Inc. stock falls Thursday, underperforms market

    DocGo (NASDAQ:DCGO) Sets New 12-Month Low After Analyst Downgrade

    DocGo (NASDAQ:DCGO) Sets New 12-Month Low After Analyst Downgrade

    Rivian stock dives into record-low territory after Ford disclosed it sold more than $200 million worth of shares

    Rivian stock dives into record-low territory after Ford disclosed it sold more than $200 million worth of shares

  • 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
    Vizio Swings to 1Q on Decline in Device Sales

    Vizio Swings to 1Q on Decline in Device Sales

    High Inflation Leaves Food Banks Struggling to Meet Needs

    High Inflation Leaves Food Banks Struggling to Meet Needs

    Nintendo’s Profit Dips Slightly as Switch Console Sales Slow

    Nintendo’s Profit Dips Slightly as Switch Console Sales Slow

    Wall Street’s Losses Worsen as Markets Tumble Worldwide

    Wall Street’s Losses Worsen as Markets Tumble Worldwide

  • NYSE
    Clean Harbors (NYSE:CLH) Downgraded by StockNews.com

    Clean Harbors (NYSE:CLH) Downgraded by StockNews.com

    Wells Fargo & Co. stock falls Thursday, underperforms market

    Wells Fargo & Co. stock falls Thursday, underperforms market

    Boeing, American Express share losses contribute to Dow’s 240-point drop

    Boeing, American Express share losses contribute to Dow’s 240-point drop

    Dutch Bros. stock spills 37% lower after forecast cut due to inflation

    Dutch Bros. stock spills 37% lower after forecast cut due to inflation

  • NASDAQ
    Tesla, Twitter Shares Drop as Elon Musk’s Legal Issues Grow

    Tesla, Twitter Shares Drop as Elon Musk’s Legal Issues Grow

    Cisco Systems Inc. stock falls Thursday, underperforms market

    Cisco Systems Inc. stock falls Thursday, underperforms market

    DocGo (NASDAQ:DCGO) Sets New 12-Month Low After Analyst Downgrade

    DocGo (NASDAQ:DCGO) Sets New 12-Month Low After Analyst Downgrade

    Rivian stock dives into record-low territory after Ford disclosed it sold more than $200 million worth of shares

    Rivian stock dives into record-low territory after Ford disclosed it sold more than $200 million worth of shares

  • 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

We Think Costamare (NYSE:CMRE) Is Taking Some Risk With Its Debt

Editorial Staff by Editorial Staff
March 15, 2022
0
We Think Costamare (NYSE:CMRE) Is Taking Some Risk With Its Debt

The external fund manager backed by Berkshire Hathaway’s Charlie Munger, Li Lu, makes no bones about it when he says ‘The biggest investment risk is not the volatility of prices, but whether you will suffer a permanent loss of capital.’ 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 Costamare Inc. (NYSE:CMRE) does use debt in its business. But the more important question is: how much risk is that debt creating?

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. Part and parcel of capitalism is the process of ‘creative destruction’ where failed businesses are mercilessly liquidated by their bankers. 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. The first step when considering a company’s debt levels is to consider its cash and debt together.

What Is Costamare’s Net Debt?

As you can see below, at the end of December 2021, Costamare had US$2.46b of debt, up from US$1.46b a year ago. Click the image for more detail. On the flip side, it has US$276.0m in cash leading to net debt of about US$2.18b.

debt-equity-history-analysis
NYSE:CMRE Debt to Equity History March 14th 2022

How Healthy Is Costamare’s Balance Sheet?

We can see from the most recent balance sheet that Costamare had liabilities of US$370.0m falling due within a year, and liabilities of US$2.31b due beyond that. On the other hand, it had cash of US$276.0m and US$32.3m worth of receivables due within a year. So it has liabilities totalling US$2.37b more than its cash and near-term receivables, combined.

Given this deficit is actually higher than the company’s market capitalization of US$1.97b, we think shareholders really should watch Costamare’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 measure a company’s debt load relative to its earnings power by looking at its net debt divided by its earnings before interest, tax, depreciation, and amortization (EBITDA) and by calculating how easily its earnings before interest and tax (EBIT) cover its interest expense (interest cover). This way, we consider both the absolute quantum of the debt, as well as the interest rates paid on it.

Costamare has a debt to EBITDA ratio of 4.2 and its EBIT covered its interest expense 4.8 times. This suggests that while the debt levels are significant, we’d stop short of calling them problematic. Pleasingly, Costamare is growing its EBIT faster than former Australian PM Bob Hawke downs a yard glass, boasting a 121% gain in the last twelve months. There’s no doubt that we learn most about debt from the balance sheet. But ultimately the future profitability of the business will decide if Costamare can strengthen its balance sheet over time.

Finally, a business needs free cash flow to pay off debt; accounting profits just don’t cut it. So the logical step is to look at the proportion of that EBIT that is matched by actual free cash flow. In the last three years, Costamare created free cash flow amounting to 8.2% of its EBIT, an uninspiring performance. For us, cash conversion that low sparks a little paranoia about is ability to extinguish debt.

Our View

To be frank both Costamare’s conversion of EBIT to free cash flow and its track record of staying on top of its total liabilities make us rather uncomfortable with its debt levels. But on the bright side, its EBIT growth rate is a good sign, and makes us more optimistic. Once we consider all the factors above, together, it seems to us that Costamare’s debt is making it a bit risky. That’s not necessarily a bad thing, but we’d generally feel more comfortable with less leverage. There’s no doubt that we learn most about debt from the balance sheet. 

Related Posts

Clean Harbors (NYSE:CLH) Downgraded by StockNews.com
NYSE

Clean Harbors (NYSE:CLH) Downgraded by StockNews.com

May 13, 2022
Wells Fargo & Co. stock falls Thursday, underperforms market
NYSE

Wells Fargo & Co. stock falls Thursday, underperforms market

May 13, 2022
Boeing, American Express share losses contribute to Dow’s 240-point drop
NYSE

Boeing, American Express share losses contribute to Dow’s 240-point drop

May 13, 2022
Dutch Bros. stock spills 37% lower after forecast cut due to inflation
NYSE

Dutch Bros. stock spills 37% lower after forecast cut due to inflation

May 12, 2022
Load More
Next Post
Exxon Mobil Corp. stock falls Monday, underperforms market

Exxon Mobil Corp. stock falls Monday, underperforms market

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
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
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
Nektar, worst performing stock in S&P 500, gets booted from the index

Nektar, worst performing stock in S&P 500, gets booted from the index

November 12, 2019
CN Rail Stock Is So Undervalued That it’s Absurd

CN Rail Stock Is So Undervalued That it’s Absurd

May 2, 2021

EDITOR'S PICK

Is Noodles (NASDAQ:NDLS) Using Too Much Debt?

Is Noodles (NASDAQ:NDLS) Using Too Much Debt?

March 21, 2022
Is Cardinal Health (NYSE:CAH) Using Too Much Debt?

Is Cardinal Health (NYSE:CAH) Using Too Much Debt?

May 17, 2021
Clean Harbors (NYSE:CLH) Seems To Use Debt Quite Sensibly

Clean Harbors (NYSE:CLH) Seems To Use Debt Quite Sensibly

September 13, 2021
Vertex Pharmaceuticals (NASDAQ:VRTX) Downgraded by Royal Bank of Canada

Vertex Pharmaceuticals (NASDAQ:VRTX) Downgraded by Royal Bank of Canada

February 3, 2022

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

Vizio Swings to 1Q on Decline in Device Sales

Clean Harbors (NYSE:CLH) Downgraded by StockNews.com

Wells Fargo & Co. stock falls Thursday, underperforms market

POPULAR POSTS

Boeing, American Express share losses contribute to Dow’s 240-point drop

Tesla, Twitter Shares Drop as Elon Musk’s Legal Issues Grow

Cisco Systems Inc. stock falls Thursday, 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.