AKA Brands Current Financial Leverage

AKA
 Stock
  

USD 2.28  0.05  2.15%   

AKA Brands' 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. AKA Brands' financial risk is the risk to AKA Brands 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 AKA Brands Fundamentals Over Time.
  
AKA Brands Total Debt is projected to increase significantly based on the last few years of reporting. The past year's Total Debt was at 135.87 Million. The current year Debt Non Current is expected to grow to about 134.4 M, whereas Debt Current is forecasted to decline to about 9.7 M.
Given that AKA Brands' debt-to-equity ratio measures a company's obligations relative to the value of its net assets, it is usually used by traders to estimate the extent to which AKA Brands is acquiring new debt as a mechanism of leveraging its assets. A high debt-to-equity ratio is generally associated with increased risk, implying that it has been aggressive in financing its growth with debt. Another way to look at debt-to-equity ratios is to compare the overall debt load of AKA Brands to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, AKA Brands is said to be less leveraged. If creditors hold a majority of AKA Brands' assets, the company is said to be highly leveraged.

AKA Brands Quarterly Debt to Equity Ratio

0.639

Given the importance of AKA Brands' capital structure, the first step in the capital decision process is for the management of AKA Brands 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 AKA Brands Holding to issue bonds at a reasonable cost.

AKA Brands Financial Leverage Rating

AKA Brands Holding bond ratings play a critical role in determining how much AKA Brands 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 AKA Brands' borrowing costs.
Piotroski F Score
5  Healthy
Beneish M Score

AKA Brands Holding Debt to Cash Allocation

As AKA Brands Holding follows its natural business cycle, the capital allocation decisions will not magically go away. AKA Brands' 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 has 176.41 M in debt with debt to equity (D/E) ratio of 0.38, which is OK given its current industry classification. AKA Brands Holding has a current ratio of 2.15, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due. Debt can assist AKA Brands until it has trouble settling it off, either with new capital or with free cash flow. So, AKA Brands' 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 AKA Brands Holding sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for AKA Brands to invest in growth at high rates of return. When we think about AKA Brands' use of debt, we should always consider it together with cash and equity.

AKA Brands Accumulated Other Comprehensive Income Over Time

AKA Brands Assets Financed by Debt

The debt-to-assets ratio shows the degree to which AKA Brands 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.

AKA Brands Debt Ratio

    
  26.2   
It appears most of the AKA Brands' 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 AKA Brands' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of AKA Brands, which in turn will lower the firm's financial flexibility. Like all other financial ratios, an AKA Brands debt ratio should be compared their industry average or other competing firms.
Share Download
Share Download

AKA Brands Holding Historical Liabilities

While analyzing the current debt level is an essential aspect of forecasting the current year budgeting needs of AKA Brands, understanding its historical liability is critical in projecting AKA Brands' 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 AKA Brands uses its financing power over time.
In order to fund their growth, businesses such as AKA Brands 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 AKA Brands' 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 AKA Brands Use of Financial Leverage

AKA Brands financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures AKA Brands'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 AKA Brands assets, the company is considered highly leveraged. Understanding the composition and structure of overall AKA Brands 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 Debt135.9 M146.6 M
Debt Current11.3 M9.7 M
Debt Non Current124.6 M134.4 M
Issuance Repayment of Debt Securities90.3 M97.4 M
Debt to Equity Ratio 0.53  0.51 
Brands Holding Corp. operates a portfolio of online fashion brands in the United States, Australia, and internationally. The company was founded in 2018 and is headquartered in San Francisco, California. AKA Brands operates under Internet Retail classification in the United States and is traded on New York Stock Exchange. It employs 1100 people.
Please read more on our technical analysis page.

Be your own money manager

Our tools can tell you how much better you can do entering a position in AKA Brands without increasing your portfolio risk or giving up expected return. As an individual investor, you need to find a reliable way to track all your investment portfolios. However, your requirements will often be based on how much of the process you decide to do yourself. In addition to allowing all investors analytical transparency into all their portfolios, our tools can evaluate.risk-adjusted returns of your individual positions relative to your overall portfolio.

Did you try this?

Run Portfolio Suggestion Now

   

Portfolio Suggestion

Get suggestions outside of your existing asset allocation including your own model portfolios
All  Next Launch Module

Pair Trading with AKA Brands

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 AKA Brands 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 AKA Brands will appreciate offsetting losses from the drop in the long position's value.

Moving against AKA Brands

0.82LQDTLiquidity Services Fiscal Year End 8th of December 2022 PairCorr
0.76CPNGCoupang Inc Cl Downward RallyPairCorr
0.67GLBEGlobal-E Online Earnings Call  TodayPairCorr
0.61AAPLApple Inc TrendingPairCorr
The ability to find closely correlated positions to AKA Brands could be a great tool in your tax-loss harvesting strategies, allowing investors a quick way to find a similar-enough asset to replace AKA Brands 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 AKA Brands - 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 AKA Brands Holding to buy it.
The correlation of AKA Brands 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 AKA Brands moves, either up or down, the other security will move in the same direction. Alternatively, perfect negative correlation means that if AKA Brands Holding 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 AKA Brands 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
Please continue to the analysis of AKA Brands Fundamentals Over Time. Note that the AKA Brands Holding information on this page should be used as a complementary analysis to other AKA Brands' statistical models used to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.

Complementary Tools for AKA Brands Stock analysis

When running AKA Brands Holding price analysis, check to measure AKA Brands' market volatility, profitability, liquidity, solvency, efficiency, growth potential, financial leverage, and other vital indicators. We have many different tools that can be utilized to determine how healthy AKA Brands is operating at the current time. Most of AKA Brands' value examination focuses on studying past and present price action to predict the probability of AKA Brands' future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move AKA Brands' price. Additionally, you may evaluate how the addition of AKA Brands to your portfolios can decrease your overall portfolio volatility.
Portfolio Optimization
Compute new portfolio that will generate highest expected return given your specified tolerance for risk
Go
Pair Correlation
Compare performance and examine fundamental relationship between any two equity instruments
Go
Stock Screener
Find equities using custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook.
Go
Portfolio Holdings
Check your current holdings and cash postion to detemine if your portfolio needs rebalancing
Go
Volatility Analysis
Get historical volatility and risk analysis based on latest market data
Go
Analyst Recommendations
Analyst recommendations and target price estimates broken down by several categories
Go
Aroon Oscillator
Analyze current equity momentum using Aroon Oscillator and other momentum ratios
Go
Bond Analysis
Evaluate and analyze corporate bonds as a potential investment for your portfolios.
Go
Performance Analysis
Check effects of mean-variance optimization against your current asset allocation
Go
Theme Ratings
Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Is AKA Brands' 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 AKA Brands. If investors know AKA Brands 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 AKA Brands listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
Quarterly Earnings Growth YOY
-0.5
Market Capitalization
293.4 M
Quarterly Revenue Growth YOY
0.062
Return On Assets
0.0259
Return On Equity
-0.0325
The market value of AKA Brands Holding is measured differently than its book value, which is the value of AKA Brands that is recorded on the company's balance sheet. Investors also form their own opinion of AKA Brands' value that differs from its market value or its book value, called intrinsic value, which is AKA Brands' 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 AKA Brands' market value can be influenced by many factors that don't directly affect AKA Brands' 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 AKA Brands' value and its price as these two are different measures arrived at by different means. Investors typically determine AKA Brands value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, AKA Brands' 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.