Ingersoll Rand Current Financial Leverage

IR
 Stock
  

USD 42.30  0.22  0.52%   

Ingersoll Rand'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. Ingersoll Rand's financial risk is the risk to Ingersoll Rand 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 see the analysis of Ingersoll Rand Fundamentals Over Time.
  
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Ingersoll Rand Long Term Debt to Equity is relatively stable at the moment as compared to the past year. Ingersoll Rand reported last year Long Term Debt to Equity of 0.38. As of 07/04/2022, Debt to Equity Ratio is likely to grow to 0.69, while Total Debt is likely to drop slightly above 3.3 B.

Ingersoll Current Financial Burden

Ingersoll Rand'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. Ingersoll Rand'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 Ingersoll Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Ingersoll Rand's stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including Ingersoll Rand, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Ingersoll Rand 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.
Price Book
1.96
Book Value
22.13
Operating Margin
0.13
Profit Margin
0.14
Return On Assets
0.0276
Return On Equity
0.0596
Given that Ingersoll Rand'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 Ingersoll Rand 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 Ingersoll Rand to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Ingersoll Rand is said to be less leveraged. If creditors hold a majority of Ingersoll Rand's assets, the company is said to be highly leveraged.

Ingersoll Rand Quarterly Debt to Equity Ratio

0.672

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

Ingersoll Rand Financial Leverage Rating

Ingersoll Rand bond ratings play a critical role in determining how much Ingersoll Rand 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 Ingersoll Rand's borrowing costs.
Piotroski F Score
8  Strong
Beneish M Score

Ingersoll Rand Debt to Cash Allocation

As Ingersoll Rand follows its natural business cycle, the capital allocation decisions will not magically go away. Ingersoll Rand'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 reports 3.54 B of total liabilities with total debt to equity ratio (D/E) of 0.39, which is normal for its line of buisiness. Ingersoll Rand has a current ratio of 2.74, indicating that it is in good position to pay out its debt commitments in time. Debt can assist Ingersoll Rand until it has trouble settling it off, either with new capital or with free cash flow. So, Ingersoll Rand's 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 Ingersoll Rand sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Ingersoll to invest in growth at high rates of return. When we think about Ingersoll Rand's use of debt, we should always consider it together with cash and equity.

Ingersoll Rand Inventories Over Time

Ingersoll Rand Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Ingersoll Rand 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.

Ingersoll Rand Debt Ratio

    
  26.72   
It seems most of the Ingersoll Rand'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 Ingersoll Rand's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Ingersoll Rand, which in turn will lower the firm's financial flexibility. Like all other financial ratios, an Ingersoll Rand debt ratio should be compared their industry average or other competing firms.
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Ingersoll Rand Historical Liabilities

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

Ingersoll Rand financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Ingersoll Rand'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 Ingersoll Rand assets, the company is considered highly leveraged. Understanding the composition and structure of overall Ingersoll Rand 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 Debt3.4 B3.3 B
Debt Current38.8 M34.1 M
Debt Non Current3.4 B3.3 B
Issuance Repayment of Debt Securities-435.7 M-447.2 M
Long Term Debt to Equity 0.38  0.39 
Debt to Equity Ratio 0.68  0.69 
Ingersoll Rand Inc. provides various mission-critical air, fluid, energy, specialty vehicle and medical technologies in the United States, Europe, the Middle East, Africa, and the Asia Pacific. Ingersoll Rand Inc. was founded in 1859 and is headquartered in Davidson, North Carolina. Ingersoll Rand operates under Specialty Industrial Machinery classification in the United States and is traded on New York Stock Exchange. It employs 16000 people.
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Ingersoll Rand Investors Sentiment

The influence of Ingersoll Rand's 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 Ingersoll. 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.

Ingersoll Rand Implied Volatility

    
  2.72  
Ingersoll Rand's implied volatility exposes the market's sentiment of Ingersoll Rand stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Ingersoll Rand's implied volatility is high, the market thinks the stock has potential for high price swings in either direction. On the other hand, the low implied volatility suggests that Ingersoll Rand stock will not fluctuate a lot when Ingersoll Rand's options are near their expiration.
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 Ingersoll Rand 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, Ingersoll Rand's short interest history, or implied volatility extrapolated from Ingersoll Rand options trading.

Current Sentiment - IR

Ingersoll Rand Investor Sentiment

Larger part of Macroaxis users are currently bullish on Ingersoll Rand. What is your judgment towards investing in Ingersoll Rand? Are you bullish or bearish?
Bullish
Bearish
98% Bullish
2% Bearish

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Please see the analysis of Ingersoll Rand Fundamentals Over Time. Note that the Ingersoll Rand information on this page should be used as a complementary analysis to other Ingersoll Rand'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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .

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Is Ingersoll Rand'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 Ingersoll Rand. If investors know Ingersoll 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 Ingersoll Rand 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
1.03
Market Capitalization
17.2 B
Quarterly Revenue Growth YOY
0.18
Return On Assets
0.0276
Return On Equity
0.0596
The market value of Ingersoll Rand is measured differently than its book value, which is the value of Ingersoll that is recorded on the company's balance sheet. Investors also form their own opinion of Ingersoll Rand's value that differs from its market value or its book value, called intrinsic value, which is Ingersoll Rand'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 Ingersoll Rand's market value can be influenced by many factors that don't directly affect Ingersoll Rand'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 Ingersoll Rand's value and its price as these two are different measures arrived at by different means. Investors typically determine Ingersoll Rand value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Ingersoll Rand'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.
  • 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.