Nathans Famous Corporate Bonds and Leverage Analysis

NATH Stock  USD 85.61  0.88  1.02%   
Nathans Famous holds a debt-to-equity ratio of -1.989. As of now, Nathans Famous' Net Debt To EBITDA is decreasing as compared to previous years. The Nathans Famous' current Debt To Assets is estimated to increase to 1.32, while Short and Long Term Debt Total is projected to decrease to under 65.1 M. With a high degree of financial leverage come high-interest payments, which usually reduce Nathans Famous' Earnings Per Share (EPS).
 
Debt Ratio  
First Reported
2010-12-31
Previous Quarter
1.25770601
Current Value
1.32
Quarterly Volatility
0.44941794
 
Credit Downgrade
 
Yuan Drop
 
Covid
As of now, Nathans Famous' Liabilities And Stockholders Equity is increasing as compared to previous years. The Nathans Famous' current Change To Liabilities is estimated to increase to about 531.3 K, while Total Current Liabilities is projected to decrease to under 11.2 M.
  
Check out the analysis of Nathans Famous Fundamentals Over Time.
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Given the importance of Nathans Famous' capital structure, the first step in the capital decision process is for the management of Nathans Famous 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 Nathans Famous to issue bonds at a reasonable cost.

Nathans Famous Bond Ratings

Nathans Famous financial ratings play a critical role in determining how much Nathans Famous 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 Nathans Famous' borrowing costs.
Piotroski F Score
6
HealthyView
Beneish M Score
(1.26)
Possible ManipulatorView

Nathans Famous Debt to Cash Allocation

As Nathans Famous follows its natural business cycle, the capital allocation decisions will not magically go away. Nathans Famous' 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.
Nathans Famous currently holds 66.39 M in liabilities. Nathans Famous has a current ratio of 3.95, suggesting that it is liquid enough and is able to pay its financial obligations when due. Note, when we think about Nathans Famous' use of debt, we should always consider it together with its cash and equity.

Nathans Famous Total Assets Over Time

Nathans Famous Assets Financed by Debt

The debt-to-assets ratio shows the degree to which Nathans Famous 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.

Nathans Famous Debt Ratio

    
  132.0   
It feels like most of the Nathans Famous' assets are financed through debt. 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 Nathans Famous' operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Nathans Famous, which in turn will lower the firm's financial flexibility.

Nathans Famous Corporate Bonds Issued

Most Nathans bonds can be classified according to their maturity, which is the date when Nathans Famous has to pay back the principal to investors. Maturities can be short-term, medium-term, or long-term (more than ten years). Longer-term bonds usually offer higher interest rates but may entail additional risks.

Nathans Short Long Term Debt Total

Short Long Term Debt Total

65.08 Million

As of now, Nathans Famous' Short and Long Term Debt Total is decreasing as compared to previous years.

Understaning Nathans Famous Use of Financial Leverage

Understanding the composition and structure of Nathans Famous' debt gives an idea of how risky is the capital structure of the business and if it is worth investing in it. The degree of Nathans Famous' financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets).
Last ReportedProjected for Next Year
Short and Long Term Debt Total66.4 M65.1 M
Net Debt45.4 M47.6 M
Short Term Debt3.8 M3.1 M
Long Term Debt59.6 M67.6 M
Long Term Debt Total97.4 M108.2 M
Short and Long Term Debt166.5 M147.3 M
Net Debt To EBITDA 1.34  1.40 
Debt To Equity(1.87)(1.96)
Interest Debt Per Share 16.37  8.66 
Debt To Assets 1.26  1.32 
Long Term Debt To Capitalization 2.24  2.35 
Total Debt To Capitalization 2.15  2.26 
Debt Equity Ratio(1.87)(1.96)
Debt Ratio 1.26  1.32 
Cash Flow To Debt Ratio 0.33  0.31 
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When determining whether Nathans Famous offers a strong return on investment in its stock, a comprehensive analysis is essential. The process typically begins with a thorough review of Nathans Famous' financial statements, including income statements, balance sheets, and cash flow statements, to assess its financial health. Key financial ratios are used to gauge profitability, efficiency, and growth potential of Nathans Famous Stock. Outlined below are crucial reports that will aid in making a well-informed decision on Nathans Famous Stock:
Check out the analysis of Nathans Famous Fundamentals Over Time.
For more detail on how to invest in Nathans Stock please use our How to Invest in Nathans Famous guide.
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Is Hotels, Restaurants & Leisure space 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 Nathans Famous. If investors know Nathans 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 Nathans Famous 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
0.05
Dividend Share
2
Earnings Share
5.34
Revenue Per Share
35.204
Quarterly Revenue Growth
0.061
The market value of Nathans Famous is measured differently than its book value, which is the value of Nathans that is recorded on the company's balance sheet. Investors also form their own opinion of Nathans Famous' value that differs from its market value or its book value, called intrinsic value, which is Nathans Famous' 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 Nathans Famous' market value can be influenced by many factors that don't directly affect Nathans Famous' 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 Nathans Famous' value and its price as these two are different measures arrived at by different means. Investors typically determine if Nathans Famous is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Nathans Famous' 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.