ADMA Biologics Current Financial Leverage

ADMA
 Stock
  

USD 3.34  0.02  0.60%   

ADMA Biologics' financial leverage is the degree to which the firm utilizes its fixed-income securities and uses equity to finance projects. Companies with high leverage are usually considered to be at financial risk. ADMA Biologics' financial risk is the risk to ADMA Biologics stockholders that is caused by an increase in debt. In other words, with a high degree of financial leverage come high-interest payments, which usually reduce Earnings Per Share (EPS).
Please continue to the analysis of ADMA Biologics Fundamentals Over Time.
  
ADMA Biologics Total Debt is projected to increase significantly based on the last few years of reporting. The past year's Total Debt was at 95.46 Million. The current year Debt Current is expected to grow to about 765 K, whereas Issuance Repayment of Debt Securities is forecasted to decline to (35.2 K).

ADMA Biologics Current Financial Burden

ADMA Biologics' liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. ADMA Biologics' cash, liquid assets, total liabilities, and shareholder equity can be utilized to evaluate how much leverage the company is using to sustain its current operations. For traders, higher-leverage indicators usually imply a higher risk to shareholders. In addition, it helps ADMA Biologics Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect ADMA Biologics' stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including ADMA Biologics, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running ADMA Biologics the most critical issue when dealing with liquidity needs is whether the current assets are properly aligned with its current liabilities. If not, management will need to obtain alternative financing to ensure that there are always enough cash equivalents on the balance sheet in reserve to pay for obligations.
non Currrent Assets Other
11.3 M
Price Book
6.35
other Assets
4.1 M
liabilities And Stockholders Equity
276.3 M
total Assets
276.3 M
Operating Margin
(0.36) 
Given the importance of ADMA Biologics' capital structure, the first step in the capital decision process is for the management of ADMA Biologics to decide how much external capital it will need to raise to operate in a sustainable way. Once the amount of financing is determined, management needs to examine the financial markets to determine the terms in which the company can boost capital. This move is crucial to the process because the market environment may reduce the ability of ADMA Biologics to issue bonds at a reasonable cost.

ADMA Biologics Financial Leverage Rating

ADMA Biologics bond ratings play a critical role in determining how much ADMA Biologics have to pay to access credit markets, i.e., the amount of interest on their issued debt. The threshold between investment-grade and speculative-grade ratings has important market implications for ADMA Biologics' borrowing costs.
Piotroski F Score
2  Frail
Beneish M Score

ADMA Biologics Debt to Cash Allocation

As ADMA Biologics follows its natural business cycle, the capital allocation decisions will not magically go away. ADMA Biologics' decision-makers have to determine if most of the cash flows will be poured back into or reinvested in the business, reserved for other projects beyond operational needs, or paid back to stakeholders and investors. Many companies eventually find out that there is only so much market out there to be conquered, and adding the next product or service is only half as profitable per unit as their current endeavors. Eventually, the company will reach a point where cash flows are strong, and extra cash is available but not fully utilized. In this case, the company may start buying back its stock from the public or issue more dividends.
The company currently holds 94.87 M in liabilities with Debt to Equity (D/E) ratio of 1.32, which is about average as compared to similar companies. ADMA Biologics has a current ratio of 7.78, suggesting that it is liquid enough and is able to pay its financial obligations when due. Debt can assist ADMA Biologics until it has trouble settling it off, either with new capital or with free cash flow. So, ADMA Biologics' shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like ADMA Biologics sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for ADMA Biologics to invest in growth at high rates of return. When we think about ADMA Biologics' use of debt, we should always consider it together with cash and equity.

ADMA Biologics Inventories Over Time

ADMA Biologics Assets Financed by Debt

The debt-to-assets ratio shows the degree to which ADMA Biologics uses debt to finance its assets. It includes both long-term and short-term borrowings maturing within one year. It also includes both tangible and intangible assets, such as goodwill.

ADMA Biologics Debt Ratio

    
  34.55   
It appears about 65% of ADMA Biologics' assets are financed through equity. Typically, companies with high debt-to-asset ratios are said to be highly leveraged. The higher the ratio, the greater risk will be associated with the ADMA Biologics' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of ADMA Biologics, which in turn will lower the firm's financial flexibility. Like all other financial ratios, an ADMA Biologics debt ratio should be compared their industry average or other competing firms.
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ADMA Biologics Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of ADMA Biologics, understanding its historical liability is critical in projecting ADMA Biologics' future earnings, especially during periods of low and high inflation and deflation. Many analysts look at the trend in assets and liabilities and evaluate how ADMA Biologics uses its financing power over time.
In order to fund their growth, businesses such as ADMA Biologics widely use Financial Leverage. For most companies, financial capital is raised by issuing debt securities and by selling common stock. The debt and equity that make up ADMA Biologics' capital structure have many risks and return implications. Leverage is an investment strategy of using borrowed money to increase the potential return of an investment. Please note, the concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Understaning ADMA Biologics Use of Financial Leverage

ADMA Biologics financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures ADMA Biologics's total debt position, including all of outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of ADMA Biologics assets, the company is considered highly leveraged. Understanding the composition and structure of overall ADMA Biologics debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business and if it is worth investing in it.
Last ReportedProjected for 2022
Total Debt95.5 M103 M
Debt Current591.1 K765 K
Debt Non Current94.9 M102.4 M
Issuance Repayment of Debt Securities-34.3 K-35.2 K
Long Term Debt to Equity 0.67  0.69 
Debt to Equity Ratio 0.67  0.69 
Please read more on our technical analysis page.

ADMA Biologics Investors Sentiment

The influence of ADMA Biologics' investor sentiment on the probability of its price appreciation or decline could be a good factor in your decision-making process regarding taking a position in ADMA Biologics. The overall investor sentiment generally increases the direction of a stock movement in a one-year investment horizon. However, the impact of investor sentiment on the entire stock markets does not have a solid backing from leading economists and market statisticians.
Investor biases related to ADMA Biologics' public news can be used to forecast risks associated with investment in ADMA Biologics. The trend in average sentiment can be used to explain how an investor holding ADMA Biologics can time the market purely based on public headlines and social activities around ADMA Biologics. Please note that most equiteis that are difficult to arbitrage are affected by market sentiment the most.
ADMA Biologics' market sentiment shows the aggregated news analyzed to detect positive and negative mentions from the text and comments. The data is normalized to provide daily scores for ADMA Biologics' and other traded tickers. The bigger the bubble, the more accurate is the estimated score. Higher bars for a given day show more participation in the average ADMA Biologics' news discussions. The higher the estimated score, the more favorable is the investor's outlook on ADMA Biologics.
Some investors attempt to determine whether the market's mood is bullish or bearish by monitoring changes in market sentiment. Unlike more traditional methods such as technical analysis, investor sentiment usually refers to the aggregate attitude towards ADMA Biologics in the overall investment community. So, suppose investors can accurately measure the market's sentiment. In that case, they can use it for their benefit. For example, some tools to gauge market sentiment could be utilized using contrarian indexes, ADMA Biologics' short interest history, or implied volatility extrapolated from ADMA Biologics options trading.

Pair Trading with ADMA Biologics

One of the main advantages of trading using pair correlations is that every trade hedges away some risk. Because there are two separate transactions required, even if ADMA Biologics position performs unexpectedly, the other equity can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in ADMA Biologics will appreciate offsetting losses from the drop in the long position's value.
The ability to find closely correlated positions to ADMA Biologics could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace ADMA Biologics when you sell it. If you don't do this, your portfolio allocation will be skewed against your target asset allocation. So, investors can't just sell and buy back ADMA Biologics - that would be a violation of the tax code under the "wash sale" rule, and this is why you need to find a similar enough asset and use the proceeds from selling ADMA Biologics to buy it.
The correlation of ADMA Biologics is a statistical measure of how it moves in relation to other equities. This measure is expressed in what is known as the correlation coefficient, which ranges between -1 and +1. A perfect positive correlation (i.e., a correlation coefficient of +1) implies that as ADMA Biologics moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if ADMA Biologics moves in either direction, the perfectly negatively correlated security will move in the opposite direction. If the correlation is 0, the equities are not correlated; they are entirely random. A correlation greater than 0.8 is generally described as strong, whereas a correlation less than 0.5 is generally considered weak.
Correlation analysis and pair trading evaluation for ADMA Biologics can also be used as hedging techniques within a particular sector or industry or even over random equities to generate a better risk-adjusted return on your portfolios.
Pair CorrelationCorrelation Matching
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Is ADMA Biologics' industry expected to grow? Or is there an opportunity to expand the business' product line in the future? Factors like these will boost the valuation of ADMA Biologics. If investors know ADMA Biologics will grow in the future, the company's valuation will be higher. The financial industry is built on trying to define current growth potential and future valuation accurately. All the valuation information about ADMA Biologics listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Market Capitalization
661.2 M
Quarterly Revenue Growth YOY
0.99
Return On Assets
(0.11) 
Return On Equity
(0.69) 
The market value of ADMA Biologics is measured differently than its book value, which is the value of ADMA Biologics that is recorded on the company's balance sheet. Investors also form their own opinion of ADMA Biologics' value that differs from its market value or its book value, called intrinsic value, which is ADMA Biologics' true underlying value. Investors use various methods to calculate intrinsic value and buy a stock when its market value falls below its intrinsic value. Because ADMA Biologics' market value can be influenced by many factors that don't directly affect ADMA Biologics' underlying business (such as a pandemic or basic market pessimism), market value can vary widely from intrinsic value.
Please note, there is a significant difference between ADMA Biologics' value and its price as these two are different measures arrived at by different means. Investors typically determine ADMA Biologics value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, ADMA Biologics' price is the amount at which it trades on the open market and represents the number that a seller and buyer find agreeable to each party.

What is Financial Leverage?

Financial leverage is the use of borrowed money (debt) to finance the purchase of assets with the expectation that the income or capital gain from the new asset will exceed the cost of borrowing. In most cases, the debt provider will limit how much risk it is ready to take and indicate a limit on the extent of the leverage it will allow. In the case of asset-backed lending, the financial provider uses the assets as collateral until the borrower repays the loan. In the case of a cash flow loan, the general creditworthiness of the company is used to back the loan. The concept of leverage is common in the business world. It is mostly used to boost the returns on equity capital of a company, especially when the business is unable to increase its operating efficiency and returns on total investment. Because earnings on borrowing are higher than the interest payable on debt, the company's total earnings will increase, ultimately boosting stockholders' profits.

Leverage and Capital Costs

The debt to equity ratio plays a role in the working average cost of capital (WACC). The overall interest on debt represents the break-even point that must be obtained to profitability in a given venture. Thus, WACC is essentially the average interest an organization owes on the capital it has borrowed for leverage. Let's say equity represents 60% of borrowed capital, and debt is 40%. This results in a financial leverage calculation of 40/60, or 0.6667. The organization owes 10% on all equity and 5% on all debt. That means that the weighted average cost of capital is (.4)(5) + (.6)(10) - or 8%. For every $10,000 borrowed, this organization will owe $800 in interest. Profit must be higher than 8% on the project to offset the cost of interest and justify this leverage.

Benefits of Financial Leverage

Leverage provides the following benefits for companies:
  • Leverage is an essential tool a company's management can use to make the best financing and investment decisions.
  • It provides a variety of financing sources by which the firm can achieve its target earnings.
  • Leverage is also an essential technique in investing as it helps companies set a threshold for the expansion of business operations. For example, it can be used to recommend restrictions on business expansion once the projected return on additional investment is lower than the cost of debt.
By borrowing funds, the firm incurs a debt that must be paid. But, this debt is paid in small installments over a relatively long period of time. This frees funds for more immediate use in the stock market. For example, suppose a company can afford a new factory but will be left with negligible free cash. In that case, it may be better to finance the factory and spend the cash on hand on inputs, labor, or even hold a significant portion as a reserve against unforeseen circumstances.

The Risk of Financial Leverage

The most obvious and apparent risk of leverage is that if price changes unexpectedly, the leveraged position can lead to severe losses. For example, imagine a hedge fund seeded by $50 worth of investor money. The hedge fund borrows another $50 and buys an asset worth $100, leading to a leverage ratio of 2:1. For the investor, this is neither good nor bad -- until the asset price changes. If the asset price goes up 10 percent, the investor earns $10 on $50 of capital, a net gain of 20 percent, and is very pleased with the increased gains from the leverage. However, if the asset price crashes unexpectedly, say by 30 percent, the investor loses $30 on $50 of capital, suffering a 60 percent loss. In other words, the effect of leverage is to increase the volatility of returns and increase the effects of a price change on the asset to the bottom line while increasing the chance for profit as well.