Will current Arrowmark Financial (USA Stocks:BANX) debt levels change in two-three weeks?

In the world of finance, what goes up must be scrutinized. Arrowmark Financial Corp, operating in the bustling asset management sector within the financial services category, presents a mixed bag of indicators that could signal impending volatility. With a total liability of **$60.8M** and a net debt position of **$55.2M**, the company's leverage is a critical factor for investors to consider. Despite a robust EBIT of **$15.7M** and net income from continuing operations at $5.4M, the firm's end period cash flow stands at a modest $395.4K, with cash reserves slightly lower at $369.7K. The company's net interest income is healthy at $18.2M, which could cushion some of the volatility, but a change to account receivables with a loss of $754.1K and total cash from financing activities showing a drain of $15.5M may raise eyebrows. Arrowmark's valuation metrics show a naive expected forecast value of $17.27, significantly higher than the valuation real value pegged at $9.06, suggesting that the market may be pricing in future growth or recovery. However, with only one analyst issuing a buy rating and the highest estimated target price reaching $20.2M, the consensus points to optimism, albeit with caution. The forward dividend yield of 0.1051 indicates a commitment to returning value to shareholders, yet this must be weighed against the company's ability to maintain such payouts in the face of potential volatility. As the fiscal year-end approaches in December, investors should keep a close eye on Arrowmark's financial maneuvering, particularly how it manages its leverage and cash flows, to better understand the risks and opportunities that lie ahead. Arrowmark Financial Corp is set to release its earnings report today. As interest grows within the capital markets sector, it is an opportune time to delve deeper into Arrowmark Financial Corp's financials, with a particular focus on its debt utilization. We will conduct a thorough analysis to determine whether Arrowmark Financial's shares are fairly valued as we move into January.
Published over two months ago
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Reviewed by Michael Smolkin

Arrowmark Financial Corp, operating in the asset management industry, presents a nuanced picture for investors considering leverage. With a modest Jensen Alpha of 0.08, the stock shows a slight potential to outperform the risk-free rate, suggesting that it may offer some alpha to a diversified portfolio. However, the Sortino Ratio stands at 0.05, indicating that the stock does not provide a particularly attractive return on bad volatility, which could be a concern for risk-averse investors. Additionally, Arrowmark's net income from continuing operations is a solid $5.4M, which may provide some cushion against market fluctuations. Given these factors, investors should weigh the company's ability to leverage its income against the potential for increased volatility, as indicated by the modest Jensen Alpha and Sortino Ratio, before taking a position in Arrowmark Financial Corp.

Major Takeaways

Arrowmark Financial Corp currently has liabilities totaling $55.6 million. Its Debt to Equity (D/E) ratio stands at 0.35, which is considered average when compared to its industry peers. The asset utilization ratio, which measures the revenue generated for every dollar of assets reported by the company, is 3.77 percent for Arrowmark Financial. This indicates that the company earns $0.0377 for every dollar of assets it owns. An increase in the asset utilization ratio would imply that Arrowmark Financial Corp is becoming more efficient in using its assets for its daily operations.
Arrowmark Financial financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Arrowmark Financial, including all of Arrowmark Financial'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 Arrowmark Financial assets, the company is considered highly leveraged. Understanding the composition and structure of overall Arrowmark Financial 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.

How important is Arrowmark Financial's Liquidity

Arrowmark Financial financial leverage refers to using borrowed capital as a funding source to finance Arrowmark Financial Corp ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Arrowmark Financial 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 Arrowmark Financial'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 Arrowmark Financial'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 Arrowmark Financial's total debt and its cash.

Breaking it down a bit more

The modest gains experienced by current holders of Arrowmark Financial could raise concerns from investors as the firm is trading at a share price of 17.13 on very low momentum in volume. The company directors and management have been quite successful in maneuvering the stock at opportune times to take advantage of all market conditions in November. The stock standard deviation of daily returns for 90 days investing horizon is currently 1.31. The below-average Stock volatility is a good sign for longer-term investment options and for buy-and-hold investors. "Investing without research is like playing poker without looking at the cards." Arrowmark Financial Corp, trading on NASDAQ under the category of Financial Services, presents an intriguing picture for investors eyeing volatility.
With an EBITDA of **$7.7 million** and an operating margin of a mere 0.77%, the company shows modest operational profitability. However, a kurtosis of 3.11 suggests a likelihood of experiencing outlier events, which could imply periods of unexpected volatility. The forward dividend yield of 10.51% might attract income investors, but the company's net income of $5.37 million against a market capitalization of **$121.77 million** indicates a tight squeeze on earnings. Additionally, the high probability of bankruptcy at 65.74% may raise red flags for risk-averse investors. Arrowmark Financial's leverage, with a total debt of $55.6 million and a debt to equity ratio of 0.35%, could exacerbate market movements, making the stock one to watch for those with an appetite for risk and a keen eye on market dynamics. .

Arrowmark technical analysis suggests possible correction

Arrowmark Financial Corp (NASDAQ: ARRW) exhibits a Treynor Ratio of 0.22, which indicates a relatively moderate risk-adjusted return when compared to the broader market. This suggests that the company has managed to generate returns above the risk-free rate, but the figure also implies that the returns may not adequately compensate for the inherent market risks. A technical analysis of ARRW stock indicates a potential correction may be on the horizon. Investors should exercise caution, as current price trends and momentum indicators suggest that the stock may be overvalued and could revert to more sustainable levels in the near term. It may be a prudent time for market participants to reassess their positions in ARRW in anticipation of these market dynamics. Arrowmark Financial Corp has exhibited relatively low volatility, with a skewness of 1.11 and a kurtosis of 3.11. Nonetheless, we advise all investors to conduct their own due diligence on Arrowmark Financial Corp to ensure that all available information aligns with their expectations of its upside potential and future return prospects. Understanding different market volatility trends can often assist investors in timing the market. Proper use of volatility indicators can help traders to measure Arrowmark Financial's stock risk in relation to market volatility during both bullish and bearish trends. The increased level of volatility that often accompanies bear markets can have a direct impact on Arrowmark Financial's stock price, adding stress to investors as they observe a decline in the value of their shares.
This can lead investors to rebalance their portfolios by acquiring different stocks as prices drop. In assessing the investment prospects of Arrowmark Financial Corp, one must weigh the mixed signals emanating from the market. Despite a consensus 'Buy' recommendation from analysts, with three strong buys and one buy, the company's stock presents a complex picture. The naive expected forecast value stands at $17.27, with a possible upside price of $18.58, suggesting some room for growth. However, investors should exercise caution given the possible downside price of $15.96 and the stark contrast between the valuation hype value and the valuation real value, which are both pegged at $17.13 and a much lower $9.06, respectively. The discrepancy between these figures indicates potential volatility or overvaluation concerns. Furthermore, the analyst target price estimated value of $1.154, while the analyst highest estimated target price looms at a staggering **$20.2 million**, indicating a significant divergence in expectations. As the fiscal year-end approaches in December, investors should closely monitor the company's performance and market dynamics before making any decisions. The prudent course of action would be to maintain a vigilant stance and consider the broader market context in which Arrowmark Financial operates, as current indicators suggest a degree of uncertainty that cannot be overlooked. .

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Editorial Staff

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 Vlad Skutelnik do not own shares of Arrowmark Financial Corp. Please refer to our Terms of Use for any information regarding our disclosure principles.

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