![]() But it is future earnings, more than anything, that will determine Benchmark Electronics's ability to maintain a healthy balance sheet going forward. There's no doubt that we learn most about debt from the balance sheet. In addition to that, we're happy to report that Benchmark Electronics has boosted its EBIT by 53%, thus reducing the spectre of future debt repayments. Indeed relative to its earnings its debt load seems light as a feather. With debt at a measly 0.016 times EBITDA and EBIT covering interest a whopping 10.8 times, it's clear that Benchmark Electronics is not a desperate borrower. Thus we consider debt relative to earnings both with and without depreciation and amortization expenses. The first is net debt divided by earnings before interest, tax, depreciation, and amortization (EBITDA), while the second is how many times its earnings before interest and tax (EBIT) covers its interest expense (or its interest cover, for short). We use two main ratios to inform us about debt levels relative to earnings. But either way, Benchmark Electronics has virtually no net debt, so it's fair to say it does not have a heavy debt load! But it's clear that we should definitely closely examine whether it can manage its debt without dilution. So its liabilities total US$293.0m more than the combination of its cash and short-term receivables.īenchmark Electronics has a market capitalization of US$972.5m, so it could very likely raise cash to ameliorate its balance sheet, if the need arose. Offsetting this, it had US$262.3m in cash and US$625.7m in receivables that were due within 12 months. Zooming in on the latest balance sheet data, we can see that Benchmark Electronics had liabilities of US$785.1m due within 12 months and liabilities of US$395.9m due beyond that. NYSE:BHE Debt to Equity History October 22nd 2022 How Strong Is Benchmark Electronics' Balance Sheet? On the flip side, it has US$262.3m in cash leading to net debt of about US$1.94m. How Much Debt Does Benchmark Electronics Carry?Īs you can see below, at the end of June 2022, Benchmark Electronics had US$264.2m of debt, up from US$139.1m a year ago. When we examine debt levels, we first consider both cash and debt levels, together.Ĭheck out the opportunities and risks within the US Electronic industry. Of course, the upside of debt is that it often represents cheap capital, especially when it replaces dilution in a company with the ability to reinvest at high rates of return. However, a more usual (but still expensive) situation is where a company must dilute shareholders at a cheap share price simply to get debt under control. In the worst case scenario, a company can go bankrupt if it cannot pay its creditors. But should shareholders be worried about its use of debt? When Is Debt A Problem?ĭebt and other liabilities become risky for a business when it cannot easily fulfill those obligations, either with free cash flow or by raising capital at an attractive price. and every practical investor I know worries about.' When we think about how risky a company is, we always like to look at its use of debt, since debt overload can lead to ruin. Howard Marks put it nicely when he said that, rather than worrying about share price volatility, 'The possibility of permanent loss is the risk I worry about.
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