Pro-Assurance Corp Current Financial Leverage

PRA
 Stock
  

USD 23.12  0.15  0.65%   

Pro-Assurance Corp'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. Pro-Assurance Corp's financial risk is the risk to Pro-Assurance Corp 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 check the analysis of Pro-Assurance Corp Fundamentals Over Time.
  
Pro-Assurance Corp Total Debt is projected to increase significantly based on the last few years of reporting. The past year's Total Debt was at 403.38 Million. The current year Issuance Repayment of Debt Securities is expected to grow to about 97.1 M, whereas Long Term Debt is forecasted to decline to about 336.6 M.

Pro-Assurance Current Financial Burden

Pro-Assurance Corp'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. Pro-Assurance Corp'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 Pro-Assurance Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Pro-Assurance Corp's stakeholders.

Asset vs Debt

Equity vs Debt

For most companies, including Pro-Assurance Corp, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Pro-Assurance Corp 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
1.08
Book Value
21.63
Operating Margin
0.0607
Profit Margin
0.0337
Return On Assets
0.0072
Return On Equity
0.0302
Given the importance of Pro-Assurance Corp's capital structure, the first step in the capital decision process is for the management of Pro-Assurance Corp 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 Pro-Assurance Corp to issue bonds at a reasonable cost.

Pro-Assurance Corp Financial Leverage Rating

Pro-Assurance Corp bond ratings play a critical role in determining how much Pro-Assurance Corp 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 Pro-Assurance Corp's borrowing costs.
Piotroski F Score
3  Frail
Beneish M Score

Pro-Assurance Corp Debt to Cash Allocation

As Pro-Assurance Corp follows its natural business cycle, the capital allocation decisions will not magically go away. Pro-Assurance Corp'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 has 444.72 M in debt with debt to equity (D/E) ratio of 0.35, which is OK given its current industry classification. Pro-Assurance Corp has a current ratio of 2.18, demonstrating that it is liquid and is capable to disburse its financial commitments when the payables are due. Debt can assist Pro-Assurance Corp until it has trouble settling it off, either with new capital or with free cash flow. So, Pro-Assurance Corp'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 Pro-Assurance Corp sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Pro-Assurance to invest in growth at high rates of return. When we think about Pro-Assurance Corp's use of debt, we should always consider it together with cash and equity.

Pro-Assurance Corp Long Term Debt Over Time

Pro-Assurance Corp Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Pro-Assurance Corp 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.

Pro-Assurance Corp Debt Ratio

    
  8.1   
It appears most of the Pro-Assurance Corp'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 Pro-Assurance Corp's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Pro-Assurance Corp, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a Pro-Assurance Corp debt ratio should be compared their industry average or other competing firms.
Share Download
Share Download

Pro-Assurance Corp Historical Liabilities

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

Pro-Assurance Corp financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Pro-Assurance Corp'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 Pro-Assurance Corp assets, the company is considered highly leveraged. Understanding the composition and structure of overall Pro-Assurance Corp 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
Long Term Debt425 M336.6 M
Total Debt403.4 M435.2 M
Issuance Repayment of Debt Securities90 M97.1 M
Debt to Equity Ratio 0.30  0.32 
Please read more on our technical analysis page.

Pro-Assurance Corp Investors Sentiment

The influence of Pro-Assurance Corp'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 Pro-Assurance. 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 Pro-Assurance Corp's public news can be used to forecast risks associated with investment in Pro-Assurance. The trend in average sentiment can be used to explain how an investor holding Pro-Assurance can time the market purely based on public headlines and social activities around Pro-Assurance Corp. Please note that most equiteis that are difficult to arbitrage are affected by market sentiment the most.
Pro-Assurance Corp's 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 Pro-Assurance Corp's 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 Pro-Assurance Corp's news discussions. The higher the estimated score, the more favorable is the investor's outlook on Pro-Assurance Corp.

Pro-Assurance Corp Implied Volatility

    
  25.22  
Pro-Assurance Corp's implied volatility exposes the market's sentiment of Pro-Assurance Corp stock's possible movements over time. However, it does not forecast the overall direction of its price. In a nutshell, if Pro-Assurance Corp'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 Pro-Assurance Corp stock will not fluctuate a lot when Pro-Assurance Corp'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 Pro-Assurance Corp 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, Pro-Assurance Corp's short interest history, or implied volatility extrapolated from Pro-Assurance Corp options trading.

Currently Active Assets on Macroaxis

Please check the analysis of Pro-Assurance Corp Fundamentals Over Time. Note that the Pro-Assurance Corp information on this page should be used as a complementary analysis to other Pro-Assurance Corp'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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.

Complementary Tools for Pro-Assurance Stock analysis

When running Pro-Assurance Corp price analysis, check to measure Pro-Assurance Corp'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 Pro-Assurance Corp is operating at the current time. Most of Pro-Assurance Corp's value examination focuses on studying past and present price action to predict the probability of Pro-Assurance Corp's future price movements. You can analyze the entity against its peers and financial market as a whole to determine factors that move Pro-Assurance Corp's price. Additionally, you may evaluate how the addition of Pro-Assurance Corp to your portfolios can decrease your overall portfolio volatility.
Instant Ratings
Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance
Go
Sync Your Broker
Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors.
Go
Money Managers
Screen money managers from public funds and ETFs managed around the world
Go
Content Syndication
Quickly integrate customizable finance content to your own investment portal
Go
Price Transformation
Use Price Transformation models to analyze depth of different equity instruments across global markets
Go
Piotroski F Score
Get Piotroski F Score based on binary analysis strategy of nine different fundamentals
Go
Price Ceiling Movement
Calculate and plot Price Ceiling Movement for different equity instruments
Go
Fundamentals Comparison
Compare fundamentals across multiple equities to find investing opportunities
Go
Probability Of Bankruptcy
Get analysis of equity chance of financial distress in the next 2 years
Go
Is Pro-Assurance Corp'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 Pro-Assurance Corp. If investors know Pro-Assurance 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 Pro-Assurance Corp 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
1.24
Market Capitalization
1.2 B
Quarterly Revenue Growth YOY
-0.092
Return On Assets
0.0072
Return On Equity
0.0302
The market value of Pro-Assurance Corp is measured differently than its book value, which is the value of Pro-Assurance that is recorded on the company's balance sheet. Investors also form their own opinion of Pro-Assurance Corp's value that differs from its market value or its book value, called intrinsic value, which is Pro-Assurance Corp'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 Pro-Assurance Corp's market value can be influenced by many factors that don't directly affect Pro-Assurance Corp'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 Pro-Assurance Corp's value and its price as these two are different measures arrived at by different means. Investors typically determine Pro-Assurance Corp value by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Pro-Assurance Corp'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.