Macroaxis Stories

Continue to hold Assured (USA Stocks:AGO) based on its current debt obligations?

February 28, 2023  By Gabriel Shpitalnik
Macroaxis Story
Assured Guaranty is scheduled to announce its earnings today. Assured Guaranty Price to Book Value is very stable at the moment as compared to the past year. Assured Guaranty reported last year Price to Book Value of 0.49. As of 28th of February 2023, Return on Average Assets is likely to grow to 0.0287, while Average Assets are likely to drop about 14.6 B. While some baby boomers are getting worried about insurance space, it is reasonable to recap Assured Guaranty as an investment alternative. We will check if the company can maintain a respectable level of debt while minimizing operating losses.
Published over a year ago
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Reviewed by Vlad Skutelnik

Assured Guaranty has 1.67 B in debt with debt to equity (D/E) ratio of 0.33, which is OK given its current industry classification. The entity has a current ratio of 0.79, suggesting that it has not enough short term capital to pay financial commitments when the payables are due. Debt can assist Assured Guaranty until it has trouble settling it off, either with new capital or with free cash flow. So, Assured Guaranty'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 Assured Guaranty sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Assured to invest in growth at high rates of return. When we think about Assured Guaranty's use of debt, we should always consider it together with cash and equity.
Assured Guaranty financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Assured Guaranty, including all of Assured Guaranty's 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 Assured Guaranty assets, the company is considered highly leveraged. Understanding the composition and structure of overall Assured Guaranty debt and outstanding corporate bonds gives a good idea of how risky the capital structure of a business is and if it is worth investing in it. Please read more on our technical analysis page.

Understanding Assured Total Debt

Assured Guaranty liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Assured Guaranty has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Assured Guaranty balance sheet include debt obligations and money owed to different Assured Guaranty vendors, workers, and loan providers. Below is the chart of Assured main long-term debt accounts currently reported on its balance sheet.
You can use Assured Guaranty financial leverage analysis tool to get a better grip on understanding its financial position

How important is Assured Guaranty's Liquidity

Assured Guaranty financial leverage refers to using borrowed capital as a funding source to finance Assured Guaranty ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Assured Guaranty financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Assured Guaranty'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 Assured Guaranty'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). Please check the breakdown between Assured Guaranty's total debt and its cash.

Assured Guaranty Gross Profit

Assured Guaranty Gross Profit growth is one of the most critical measures in evaluating the company. The Gross Profit growth rate is calculated simply by comparing Assured Guaranty previous period's values with its current period's values. Each time period you're measuring should be of equal lengths the increase or decrease, in a company's Gross Profit between two periods. Here we show Assured Guaranty Gross Profit growth over the last 10 years. Please check Assured Guaranty's gross profit and other fundamental indicators for more details.

What is driving Assured Guaranty Investor Appetite?

The firm reported the last year's revenue of 698 M. Total Income to common stockholders was 419 M with profit before taxes, overhead, and interest of 950 M.

Asset Breakdown

Total Assets15.07 Billion
Goodwill195.37 Million
Tax Assets451.13 Million

Assured Guaranty will most likely finish below USD64 in 60 days

Recent Total Risk Alpha is up to 0.08. Price may decline again. Assured Guaranty has relatively low volatility with skewness of -0.33 and kurtosis of 0.36. However, we advise all investors to independently investigate Assured Guaranty to ensure all accessible information is consistent with the expectations about its upside potential and future expected returns. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Assured Guaranty's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Assured Guaranty's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Our Final Take On Assured Guaranty

Although some other entities in the insurance—specialty industry are either recovering or due for a correction, Assured may not be as strong as the others in terms of longer-term growth potentials. While some insiders may not share our view, we believe it may be a good time to increase your existing holdings in Assured. Please use our equity advice module to run different scenarios to ensure your current risk level and investment horizon are fully reflective of your current investing preferences in regards to Assured Guaranty.

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Editorial Staff

Gabriel Shpitalnik is a Member of Macroaxis Editorial Board. Gabriel is a young entrepreneur and writes predominantly on the business, technology, and finance sector. He likes to analyze different equity instruments across a wide range of industries focusing primarily on consumer products and evolving technologies. View Profile
This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Gabriel Shpitalnik do not own shares of Assured Guaranty. Please refer to our Terms of Use for any information regarding our disclosure principles.

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