Is INSW's Balance Sheet Healthy?
Li Lu, a famous fund manager supported by Charlie Munger, once stated that the main risk in investing is losing your money permanently, not price changes. Debt is a factor to think about when measuring a stock's risk because excessive debt can lead to a company's downfall. International Seaways, Inc. (NYSE:INSW) has debt, but the focus is on whether this debt increases the company's risk.
The Dangers Of Debt: Explained
Debt is only a problem if a company can't pay it off easily. If it's really bad, lenders can take control of the business. Or, the company might have to raise new equity at a low price which isn't good for shareholders. However, sometimes debt is important for businesses. Before judging a company's debt, consider its cash and debt together.
Check out our newest report on International Seaways. We've done an analysis of the company. Find out more about their financials and performance. Get a better understanding of how they are doing in the market. Read our report to make informed decisions about investments.
International Seaways' Net Debt: Explained
International Seaways owed $932.7 million in debt by March 2023. This is less than the $1.12 billion they had the previous year. They also have money in the bank, with $267.5 million in cash. Their net debt is therefore $665.2 million.
Is International Seaways' Balance Sheet Strong Enough?
International Seaways owes a lot of money soon. They have to pay $227.5m very soon and $786.8m later. But, they have some money too. They have $267.5m in cash and $259.6m that people owe them. That's $487.2m less than what they owe.
International Seaways is worth US$1.77b which means they could raise enough capital if needed. Their deficit isn't too bad. However, we need to watch out for any signs that their debt is too risky.
To compare a company's debt to its earnings, we use two calculations: net debt divided by EBITDA and EBIT divided by interest expense. We factor in depreciation and amortization.
International Seaways' low net debt to EBITDA ratio is only 0.95. Its EBIT can cover its interest expense 10.5 times over. It is not threatened by its debt. Despite losing money on the EBIT line last year, International Seaways has turned things around in the last 12 months. Its EBIT is US$606m. Analyzing the balance sheet is important when assessing debt. However, future earnings will determine International Seaways' ability to maintain a healthy balance sheet. Check out this free report on analyst profit forecasts to see what professionals think.
Businesses need free cash flow to pay debt, accounting profits aren't enough. Check how much of earnings before interest and tax (EBIT) turns into free cash flow. International Seaways had 63% of EBIT as free cash flow last year. It's normal because free cash flow doesn't include interest and tax. This cash helps reduce debt.
We're happy to report that International Seaways can cover interest expenses with its earnings. Its debt-to-earnings ratio also supports this. We believe the company can handle its debt well. However, debt can also bring risks, so it's important to monitor it. It's best to focus on the balance sheet when analyzing debt, but risks can also exist elsewhere. We've identified 4 warning signs for International Seaways, including one that's concerning. It's important to be aware of these risks.
If you want a company that grows fast and has a strong financial standing, check out our net cash growth stock list now.
"Making Valuation Simple: Our Expertise Helps"
Want to know if International Seaways is over or undervalued? Check out our analysis. It has everything: fair value estimates, risks, warnings, dividends, insider transactions and financial health.
Check out our analysis for free. Get Insightful Information Receive helpful and informative details. Discover Key Points Find out important information. Gain a Deeper Understanding Develop a better understanding of the topic. Explore the Analysis Take a closer look at our analysis. Uncover New Insights Discover new insights and information. Benefit from our Expertise Take advantage of our expertise.
If you have feedback, reach out to us. Worried about the article? Let us know. You can contact us directly or email our editorial team at editorial-team (at) simplywallst.com.
Simply Wall St wrote this article for informational purposes. They used historic data and analyst predictions to create an unbiased analysis. This article is not financial advice and doesn't tell readers to buy or sell any stocks. Different readers may have different financial goals and situations. The article focuses on long-term analysis based on basic data. However, readers should note that sometimes they don't use the newest news or qualitative information. Simply Wall St doesn't have any investments in the companies they mentioned.
