Is Boston Omaha (NASDAQ: BOMN) being weighed down by its debt burden?
Some say that volatility, rather than debt, is the best way to view risk as an investor, but Warren Buffett famously said, “Volatility is far from synonymous with risk.” So it seems that the smart money knows that debt – which is usually associated with bankruptcies – is a very important factor in assessing how risky a business is. We can see that Boston Omaha Corporation (NASDAQ: BOMN) uses debt in its business. The more important question, however, is: what is the risk of incurring this debt?
What is the risk of debt?
Debt and other liabilities become risky for a company when it cannot easily meet those obligations with free cash flow or by raising capital at an attractive price. When things get really bad, lenders can take control of the business. However, a more common (but still costly) occurrence is when a company needs to issue stocks at cheap prices and permanently dilute shareholders in order to prop up its balance sheet. However, by replacing the dilution, debt can be an extremely good tool for companies that need capital to invest in growth with high returns. When we examine leverage, we first look at both cash and leverage together.
Check out our latest analysis for Boston Omaha
What is Boston Omaha’s Debt?
The image below, which you can click for more details, shows that Boston Omaha had $ 18.1 million in debt in June 2020, down from none in a year. However, it has a cash balance of $ 177.4 million, resulting in a net cash of $ 159.3 million.
NasdaqCM: BOMN Debt to Equity History August 9, 2020
How healthy is the Boston Omaha record?
If we look at the latest balance sheet data, we can see that Boston Omaha had $ 21.4 million in debt and $ 65.5 million in debt on top of that in 12 months. These commitments were due in 12 months in cash of US $ 177.4 million and accounts receivable for US $ 4.39 million. So it actually has $ 94.8 million more cash than total liabilities.
It is good to see that Boston Omaha has ample liquidity on its balance sheet, which suggests conservative management of liabilities. Since it has many assets, it is unlikely to have any problems with its lenders. Put simply, the fact that Boston Omaha has more cash than debt is arguably a good indication that it can safely manage its debt. The balance sheet is clearly the area to focus on when analyzing debt. Most of all, future profits will determine Boston Omaha’s ability to maintain a healthy balance sheet going forward. So if your focus is on the future, this is what you can check out free Report with earnings forecast by analysts.
Over a 12 month period, Boston Omaha reported sales of $ 45 million, a 34% profit, even though no earnings before interest and taxes were reported. With a little luck, the company can find its way to profitability.
How Risky is Boston Omaha?
While Boston Omaha lost money on earnings before interest and taxes (EBIT), it actually generated positive free cash flow of $ 2.8 million. When we put that at par and factor in the net cash position, we don’t think the stock is too risky in the short term. We consider the sales growth of 34% to be a good sign. There is no doubt that rapid sales growth can cure all kinds of diseases for one stock. There is no doubt that we learn the most about debt from the balance sheet. However, not all of the investment risk is on the balance sheet – far from it. For example, take risks – Boston has Omaha 2 warning signs (and 1, which doesn’t suit us too well) We think you should know about this.
When all is said and done, sometimes it is easier to focus on businesses that don’t even need debt. Readers can access a list of growth stocks with no net debt 100% free, right now.
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