Lightinthebox Holding Current Financial Leverage

LITB
 Stock
  

USD 1.06  0.10  10.42%   

Lightinthebox Holding'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. Lightinthebox Holding's financial risk is the risk to Lightinthebox Holding 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).
Additionally, see the analysis of Lightinthebox Holding Fundamentals Over Time.
  
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Lightinthebox Holding Total Debt is projected to decrease significantly based on the last few years of reporting. The past year's Total Debt was at 11.65 Million. The current year Debt Current is expected to grow to about 3.9 M, whereas Debt Non Current is forecasted to decline to about 7.6 M.

Lightinthebox Current Financial Burden

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

Asset vs Debt

Equity vs Debt

For most companies, including Lightinthebox Holding, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Lightinthebox Holding Co 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
2.07
Book Value
0.52
Operating Margin
-0.0558
Profit Margin
0.0148
Return On Assets
-0.0897
Return On Equity
0.12
Given that Lightinthebox Holding'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 Lightinthebox Holding 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 Lightinthebox Holding to its assets or equity, showing how much of the company assets belong to shareholders vs. creditors. If shareholders own more assets, Lightinthebox Holding is said to be less leveraged. If creditors hold a majority of Lightinthebox Holding's assets, the company is said to be highly leveraged.

Lightinthebox Holding Quarterly Debt to Equity Ratio

2.105

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

Lightinthebox Holding Financial Leverage Rating

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

Lightinthebox Holding Debt to Cash Allocation

As Lightinthebox Holding Co follows its natural business cycle, the capital allocation decisions will not magically go away. Lightinthebox Holding'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 11.73 M in liabilities with Debt to Equity (D/E) ratio of 0.18, which may suggest the company is not taking enough advantage from borrowing. Lightinthebox Holding has a current ratio of 0.74, indicating that it has a negative working capital and may not be able to pay financial obligations when due. Debt can assist Lightinthebox Holding until it has trouble settling it off, either with new capital or with free cash flow. So, Lightinthebox Holding'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 Lightinthebox Holding sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Lightinthebox to invest in growth at high rates of return. When we think about Lightinthebox Holding's use of debt, we should always consider it together with cash and equity.

Lightinthebox Holding Accumulated Other Comprehensive Income Over Time

Lightinthebox Holding Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Lightinthebox Holding 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.

Lightinthebox Holding Debt Ratio

    
  8.72   
It appears most of the Lightinthebox Holding'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 Lightinthebox Holding's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Lightinthebox Holding, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Lightinthebox Holding debt ratio should be compared their industry average or other competing firms.
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Lightinthebox Holding Historical Liabilities

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

Lightinthebox Holding financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Lightinthebox Holding'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 Lightinthebox Holding assets, the company is considered highly leveraged. Understanding the composition and structure of overall Lightinthebox Holding 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 Debt11.6 M14.2 M
Debt Current3.8 M3.9 M
Debt Non Current7.9 M7.6 M
Issuance Repayment of Debt Securities-44 K-45.2 K
Debt to Equity Ratio 2.06  2.23 
LightInTheBox Holding Co., Ltd. operates as a cross-border e-commerce platform that delivers products directly from manufacturers to its customers worldwide. LightInTheBox Holding Co., Ltd. was founded in 2007 and is headquartered in Shanghai, the Peoples Republic of China. Lightinthebox Holding operates under Internet Retail classification in the United States and is traded on New York Stock Exchange.
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Lightinthebox Holding Investors Sentiment

The influence of Lightinthebox Holding'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 Lightinthebox. 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.
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 Lightinthebox Holding 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, Lightinthebox Holding's short interest history, or implied volatility extrapolated from Lightinthebox Holding options trading.

Current Sentiment - LITB

Lightinthebox Holding Investor Sentiment

Most of Macroaxis users are now bullish on Lightinthebox Holding Co. What is your trading attitude regarding investing in Lightinthebox Holding Co? Are you bullish or bearish?
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2% Bearish

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Additionally, see the analysis of Lightinthebox Holding Fundamentals Over Time. Note that the Lightinthebox Holding information on this page should be used as a complementary analysis to other Lightinthebox Holding'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 Bond Directory module to find actively traded corporate debentures issued by US companies.

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Is Lightinthebox Holding'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 Lightinthebox Holding. If investors know Lightinthebox 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 Lightinthebox Holding 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
0.054
Market Capitalization
108.5 M
Quarterly Revenue Growth YOY
-0.16
Return On Assets
-0.0897
Return On Equity
0.12
The market value of Lightinthebox Holding is measured differently than its book value, which is the value of Lightinthebox that is recorded on the company's balance sheet. Investors also form their own opinion of Lightinthebox Holding's value that differs from its market value or its book value, called intrinsic value, which is Lightinthebox Holding'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 Lightinthebox Holding's market value can be influenced by many factors that don't directly affect Lightinthebox Holding'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 Lightinthebox Holding's value and its price as these two are different measures arrived at by different means. Investors typically determine Lightinthebox Holding value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Lightinthebox Holding'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.