Ideanomics, a player in the Farm & Heavy Construction Machinery industry, presents an intriguing investment opportunity from a leverage perspective. With a substantial 447.8M
common stock shares outstanding, the company has a broad base of equity to leverage for growth. Despite a loss in working capital of 9.6M
, the firm's financial position
remains robust, backed by a healthy 269.9M
in cash and short-term investments. This liquidity
buffer could potentially be used to finance strategic initiatives, thereby unlocking untapped potential in the stock. However, investors should also consider the company's negative price change and the potential risks associated with its leverage strategy.
Ideanomics currently holds 70.85 million in liabilities, with a Debt to Equity (D/E) ratio of 0.11. This ratio may suggest that the company is not leveraging borrowing to its full potential. With a current ratio of 2.69, Ideanomics appears to be liquid enough to meet its financial obligations when they are due. While debt can be beneficial for Ideanomics until it encounters difficulties in repayment, either through new capital or free cash flow, there is a risk that shareholders could end up with nothing if the company fails to meet its legal debt repayment obligations. However, a more common scenario is when companies like Ideanomics issue additional shares at discounted prices, thereby diluting the value for existing shareholders. In such cases, debt can be a superior tool for Ideanomics to invest in growth at high rates of return. When evaluating Ideanomics' use of debt, it is important to consider it in conjunction with cash and equity.
Ideanomics financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Ideanomics, including all of Ideanomics'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 Ideanomics assets, the company is considered highly leveraged. Understanding the composition and structure
of overall Ideanomics 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
Understanding Ideanomics Total Debt
Ideanomics liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Ideanomics 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 Ideanomics balance sheet include debt obligations and money owed to different Ideanomics vendors, workers, and loan providers. Below is the chart of Ideanomics main long-term debt accounts currently reported on its balance sheet.
You can use Ideanomics financial leverage analysis
tool to get a better grip on understanding its financial position
How important is Ideanomics's Liquidity
Ideanomics financial leverage
refers to using borrowed capital as a funding source to finance Ideanomics ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Ideanomics 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 Ideanomics' 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 Ideanomics' 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 Ideanomics's total debt and its cash.
What is driving Ideanomics Investor Appetite?
The big decline in price over the last few months for Ideanomicsmay raise some interest from investors. The stock closed today at a share price of 2.17
in trading volume. The company directors and management failed to add value to investors and position the firm supply of money to exploit market volatility
. However, diversifying your holdings with Ideanomics or similar stocks can still protect your portfolios during high-volatility market scenarios. The stock standard deviation of daily returns for 90 days investing horizon is currently 7.92. The very high volatility is mostly attributed to the latest market swings and not very good earnings reports from some of the Ideanomics partners.
|Deposit Liabilities||1.55 Million|
|Total Liabilities||103.84 Million|
|Current Liabilities||82.93 Million|
|Long-Term Liabilities||16.8 Million|
|Tax Liabilities||2.35 Million|
Every cloud has a silver lining, and this may be the case for investors considering Ideanomics stock. Despite a high probability of bankruptcy at 79.99%, the company boasts a healthy current ratio of 2.74X, indicating its ability to cover short-term liabilities. Moreover, the firm's net debt stands at a negative $199M, suggesting a strong financial position. The company's market capitalization is a modest $26.99M
, and with shares primarily owned by insiders (9.61%) and institutions (2.50%), there's a clear vote of confidence from those with inside knowledge of the company's operations. However, investors should be cautious of the company's negative return on assets (-0.26) and risk-adjusted performance (-0.11), which indicate potential challenges in profitability and risk management. In conclusion, while Ideanomics presents certain risks, its untapped potential could offer a lucrative opportunity for risk-tolerant investors. .
Will Ideanomics current slide continue?
The current Treynor ratio indicator for Ideanomics has decreased to -0.44, indicating a higher degree of systematic risk
compared to the potential returns on the stock. This ratio, commonly used to assess the risk-reward trade-off, could suggest a possible price surge due to its negative value. However, it's crucial to understand that a negative Treynor ratio might also imply that the risk linked to the investment surpasses the returns, potentially leading to a continuation of the ongoing decline in Ideanomics' stock price
. Consequently, investors should proceed with caution and take into account other market factors and financial indicators before making a decision. Ideanomics has exhibited above-average volatility over the chosen time period. Investors should examine Ideanomics independently to ensure that their intended market timing
strategies align with their expectations about Ideanomics' volatility. Understanding different market volatility
trends often assists investors in timing the market. Proper utilization of volatility indicators allows traders to compare Ideanomics' stock risk against market volatility during both bullish and bearish trends. The heightened level of volatility that accompanies bear markets can directly affect Ideanomics' stock price, adding stress to investors as they witness the value of their shares decline. This typically compels investors to rebalance their portfolios by purchasing different stocks as prices drop.
Our Final Perspective on Ideanomics
While some other entities in the farm & heavy construction machinery industry are either recovering or due for a correction, Ideanomics may not be performing as strong as the other in terms of long-term growth potentials. With a relatively neutral outlook on the current economy, it is better to hold off any trading of Ideanomics as the current risk-reward utility is not appealing enough. 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 Ideanomics.
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