Lancaster Colony Current Financial Leverage
| LANC Stock | USD 186.87 3.25 1.77% |
Lancaster Colony holds a debt-to-equity ratio of 0.042. At present, Lancaster Colony's Short Term Debt is projected to decrease significantly based on the last few years of reporting. The current year's Cash Flow To Debt Ratio is expected to grow to 7.12, whereas Net Debt is forecasted to decline to (55.3 M). Lancaster Colony's financial risk is the risk to Lancaster Colony 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).
Asset vs Debt
Equity vs Debt
Lancaster Colony'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. Lancaster Colony'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 Lancaster Stock's retail investors understand whether an upcoming fall or rise in the market will negatively affect Lancaster Colony's stakeholders.
For most companies, including Lancaster Colony, marketable securities, inventories, and receivables are the most common assets that could be converted to cash. However, for the executing running Lancaster Colony 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 5.9452 | Book Value 33.005 | Operating Margin 0.1061 | Profit Margin 0.0692 | Return On Assets 0.103 |
Lancaster |
Lancaster Colony Financial Leverage Rating
Lancaster Colony bond ratings play a critical role in determining how much Lancaster Colony 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 Lancaster Colony's borrowing costs.| Piotroski F Score | 8 Strong |
| Beneish M Score | -4.24 Unlikely Manipulator |
Lancaster Colony Debt to Cash Allocation
As Lancaster Colony follows its natural business cycle, the capital allocation decisions will not magically go away. Lancaster Colony'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 29.99 M in liabilities with Debt to Equity (D/E) ratio of 0.04, which may suggest the company is not taking enough advantage from borrowing. Lancaster Colony has a current ratio of 2.08, suggesting that it is liquid enough and is able to pay its financial obligations when due. Debt can assist Lancaster Colony until it has trouble settling it off, either with new capital or with free cash flow. So, Lancaster Colony'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 Lancaster Colony sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Lancaster to invest in growth at high rates of return. When we think about Lancaster Colony's use of debt, we should always consider it together with cash and equity.Lancaster Colony Total Assets Over Time
Lancaster Colony Assets Financed by 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 Lancaster Colony's operation. In addition, a high debt-to-assets ratio may indicate a low borrowing capacity of Lancaster Colony, which in turn will lower the firm's financial flexibility. Like all other financial ratios, a a Lancaster Colony debt ratio should be compared their industry average or other competing firms.Lancaster Short Long Term Debt Total
Short Long Term Debt Total |
|
Understaning Lancaster Colony Use of Financial Leverage
Lancaster Colony financial leverage ratio helps in determining the effect of debt on the overall profitability of the company. It measures Lancaster Colony'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 Lancaster Colony assets, the company is considered highly leveraged. Understanding the composition and structure of overall Lancaster Colony 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. Financial leverage can amplify the potential profits to Lancaster Colony's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Lancaster Colony's 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 Reported | Projected for Next Year | ||
| Short and Long Term Debt Total | 27 M | 33.5 M | |
| Net Debt | -52.6 M | -55.3 M | |
| Short Term Debt | 9.7 M | 13.9 M | |
| Long Term Debt | 0.00 | 0.00 | |
| Net Debt To EBITDA | (0.28) | (0.26) | |
| Debt To Equity | 0.04 | 0.04 | |
| Interest Debt Per Share | 1.26 | 1.16 | |
| Debt To Assets | 0.03 | 0.03 | |
| Long Term Debt To Capitalization | 0.03 | 0.02 | |
| Total Debt To Capitalization | 0.04 | 0.04 | |
| Debt Equity Ratio | 0.04 | 0.04 | |
| Debt Ratio | 0.03 | 0.03 | |
| Cash Flow To Debt Ratio | 6.78 | 7.12 |
Building efficient market-beating portfolios requires time, education, and a lot of computing power!
The Portfolio Architect is an AI-driven system that provides multiple benefits to our users by leveraging cutting-edge machine learning algorithms, statistical analysis, and predictive modeling to automate the process of asset selection and portfolio construction, saving time and reducing human error for individual and institutional investors.
Try AI Portfolio ArchitectCheck out the analysis of Lancaster Colony Fundamentals Over Time. For information on how to trade Lancaster Stock refer to our How to Trade Lancaster Stock guide.You can also try the Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
Complementary Tools for Lancaster Stock analysis
When running Lancaster Colony's price analysis, check to measure Lancaster Colony'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 Lancaster Colony is operating at the current time. Most of Lancaster Colony's value examination focuses on studying past and present price action to predict the probability of Lancaster Colony's future price movements. You can analyze the entity against its peers and the financial market as a whole to determine factors that move Lancaster Colony's price. Additionally, you may evaluate how the addition of Lancaster Colony to your portfolios can decrease your overall portfolio volatility.
| Sync Your Broker Sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors. | |
| Stock Screener Find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook. | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Pattern Recognition Use different Pattern Recognition models to time the market across multiple global exchanges | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Equity Valuation Check real value of public entities based on technical and fundamental data | |
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Idea Optimizer Use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| My Watchlist Analysis Analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like |
Is Lancaster Colony'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 Lancaster Colony. If investors know Lancaster 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 Lancaster Colony 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 0.043 | Dividend Share 3.45 | Earnings Share 4.68 | Revenue Per Share 68.016 | Quarterly Revenue Growth 0.202 |
The market value of Lancaster Colony is measured differently than its book value, which is the value of Lancaster that is recorded on the company's balance sheet. Investors also form their own opinion of Lancaster Colony's value that differs from its market value or its book value, called intrinsic value, which is Lancaster Colony'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 Lancaster Colony's market value can be influenced by many factors that don't directly affect Lancaster Colony'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 Lancaster Colony's value and its price as these two are different measures arrived at by different means. Investors typically determine if Lancaster Colony is a good investment by looking at such factors as earnings, sales, fundamental and technical indicators, competition as well as analyst projections. However, Lancaster Colony'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.