According to Michael Grey of Market Haven, Exco Technologies’ recent actions have led to many people raising their eyebrows. While the firm does have a well-maintained balance sheet and continues to see its value rise, it only pays out average dividends. However, shareholders are more concerned about debt that the company has taken on recently, as it signals to investors that the company is becoming risky.
Debt is an essential tool that nearly every business uses to either support its growth or sustain its operations. Taking on debt does make the business a little risky since it is a cheaper way of generating capital and can lead to a company taking on debt more often. And with Exco Technologies taking on more debt recently, it is worth looking into how much is too much debt. How much debt can a company take on before it starts to become a risky investment?
How Much Debt is Exco Technologies in?
According to Market Haven senior account manager Michael Grey, a good place to start when examining Exco is how much debt it has in total. The company has CA$ 116.3m of debt as of March 2023, which was an increase of CA$ 26m over the previous year. The company’s cash reserves peak at just CA$ 13.1m, bringing its net debt down to CA$103.2m.
When looking at the situation at face value, it does seem like the company is struggling to get by. With over CA$100m in debt, it does look like that the company is currently struggling to keep things together. However, there are a few other factors that are worth considering to get a full picture of the company’s overall financial stability.
Comparing Exco Technology Liabilities to Its Assets
While true that Exco only has CA$13m in cash, it also has CA$132.5m in receivables due in a year. Therefore, the total receivables that it has jumps up to over CA$145m. On the other hand, the total liabilities it has are CA$241m after combining short-term liabilities of CA$109.4 and more long-term liabilities equally to CA$131.6m.
After Michael Grey of Market Haven considers all of its liabilities and its assets, the company is still short CA$95.4m. However, the company is still worth over CA$300m, which means that it could easily generate that money easily to pay off its debts. Other than an increase in revenue, it could even burn more shares to further improve the current state of its finances.
Furthermore, given the size of the company, it can open even more avenues to get payments from investors.
Is Exco in Trouble?
Exco is a big company with a total market valuation of CA$344m and has about CA$95m in total debts. Luckily, as a big company, it can generate the money necessary to pay off this loan by burning its shares or taking on another loan with a lower interest rate.
To conclude, according to Market Haven senior account manager Michael Grey, investors of Exco Technologies do not need to worry about the company being in debt since it has the means to pay it off.
