Blue Apron Current Financial Leverage

APRN -  USA Stock  

USD 7.90  0.35  4.64%

Blue Apron's 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. Blue Apron's financial risk is the risk to Blue Apron 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 Blue Apron Fundamentals Over Time.

Blue Apron Bonds 

 
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Blue Apron Total Debt is quite stable at the moment as compared to the past year. The company's current value of Total Debt is estimated at 85.95 Million. Debt Non Current is expected to rise to about 84 M this year, although the value of Debt Current will most likely fall to about 3.1 M.

Blue Apron Current Financial Burden

Blue Apron's liquidity is one of the most fundamental aspects of both its future profitability and its ability to meet different types of ongoing financial obligations. Blue Apron's 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 Blue Apron Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Blue Apron's stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including Blue Apron, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Blue Apron Holdings 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.
Given that Blue Apron's 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 Blue Apron 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 Blue Apron to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Blue Apron is said to be less leveraged. If creditors hold a majority of Blue Apron's assets, the company is said to be highly leveraged.

Blue Apron Quarterly Debt to Equity Ratio

4.535Share
Given the importance of Blue Apron's capital structure, the first step in the capital decision process is for the management of Blue Apron 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 Blue Apron Holdings to issue bonds at a reasonable cost.

Blue Apron Financial Leverage Rating

Blue Apron Holdings bond ratings play a critical role in determining how much Blue Apron 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 Blue Apron's borrowing costs.
Overall Bond Rating
Not Rated
Average S&P Rating
N/A
Piotroski F Score
3  Frail
Beneish M Score

Blue Apron Holdings Debt to Cash Allocation

As Blue Apron Holdings follows its natural business cycle, the capital allocation decisions will not magically go away. Blue Apron's 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 65.9 M in liabilities with Debt to Equity (D/E) ratio of 1.94, which is about average as compared to similar companies. Blue Apron Holdings has a current ratio of 0.9, indicating that it has a negative working capital and may not be able to pay financial obligations when due.

Blue Apron Total Assets Over Time

Blue Apron Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Blue Apron 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.

Blue Apron Debt Ratio

    
  28.34   
It seems most of the Blue Apron's 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 Blue Apron's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Blue Apron, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Blue Apron debt ratio should be compared their industry average or other competing firms.
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Blue Apron Holdings Historical Liabilities

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

Blue Apron financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Blue Apron'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 Blue Apron assets, the company is considered highly leveraged. Understanding the composition and structure of overall Blue Apron 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 Debt61.4 M86 M
Debt Current3.1 M3.1 M
Debt Non Current58.2 M84 M
Issuance Repayment of Debt Securities-20.5 M-21.1 M
Debt to Equity Ratio 2.72  2.94 
Blue Apron Holdings, Inc. operates direct-to-consumer platform that delivers original recipes, and fresh and seasonal ingredients. Blue Apron Holdings, Inc. was founded in 2012 and is headquartered in New York, New York. Blue Apron operates under Internet Retail classification in the United States and is traded on New York Stock Exchange. It employs 1434 people.
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Pair Trading with Blue Apron

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 Blue Apron 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 Blue Apron will appreciate offsetting losses from the drop in the long position's value.

Blue Apron Pair Correlation

Equities Pair Trading Analysis

Correlation analysis and pair trading evaluation for Blue Apron and EBay Inc. Pair trading can be used as a hedging technique within a particular sector or industry or even over random equities to generate better risk-adjusted return
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Please continue to the analysis of Blue Apron Fundamentals Over Time. Note that the Blue Apron Holdings information on this page should be used as a complementary analysis to other Blue Apron's 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.

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When running Blue Apron Holdings price analysis, check to measure Blue Apron's 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 Blue Apron is operating at the current time. Most of Blue Apron's value examination focuses on studying past and present price action to predict the probability of Blue Apron's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Blue Apron's price. Additionally, you may evaluate how the addition of Blue Apron to your portfolios can decrease your overall portfolio volatility.
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Is Blue Apron's 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 Blue Apron. If investors know Blue Apron 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 Blue Apron listed above have to be considered, but the key to understanding future value is determining which factors weigh more heavily than others.
The market value of Blue Apron Holdings is measured differently than its book value, which is the value of Blue Apron that is recorded on the company's balance sheet. Investors also form their own opinion of Blue Apron's value that differs from its market value or its book value, called intrinsic value, which is Blue Apron's 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 Blue Apron's market value can be influenced by many factors that don't directly affect Blue Apron's 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 Blue Apron's value and its price as these two are different measures arrived at by different means. Investors typically determine Blue Apron value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Blue Apron's 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.
  • 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.