Does Ideanomics (NASDAQ: IDEX) have a healthy track record?
Howard Marks put it well when he said that, rather than worrying about stock price volatility, “The possibility of permanent loss is the risk that worries me … and every investor practices that I know worries “. When we think about how risky a business is, we always like to look at its use of debt because debt overload can lead to bankruptcy. Mostly, Ideanomics, Inc. (NASDAQ: IDEX) carries debt. But does this debt worry shareholders?
When is debt dangerous?
Debt helps a business until the business struggles to repay it, either with new capital or with free cash flow. An integral part of capitalism is the process of “creative destruction” where bankrupt companies are ruthlessly liquidated by their bankers. While it’s not too common, we often see indebted companies continually diluting their shareholders because lenders are forcing them to raise capital at a ridiculous price. Of course, debt can be an important tool in businesses, especially capital intensive businesses. The first step in examining a company’s debt levels is to consider its cash flow and debt together.
See our latest review for Ideanomics
What is the debt of Ideanomics?
The image below, which you can click for more details, shows that in March 2021, Ideanomics was in debt of $ 81.3 million, up from $ 20.9 million in a year. However, his balance sheet shows that he holds $ 371.0 million in cash, so he actually has $ 289.7 million in net cash.
How healthy is Ideanomics’ track record?
We can see from the most recent balance sheet that Ideanomics had liabilities of US $ 120.8 million due within one year and liabilities of US $ 19.6 million due beyond. . On the other hand, he had $ 371.0 million in cash and $ 5.65 million in receivables within one year. He can therefore take advantage of $ 236.3 million in liquid assets more than total Liabilities.
It is good to see that Ideanomics has a lot of cash on its balance sheet, which suggests prudent liability management. Due to its strong net asset position, it should not encounter any problems with its lenders. Put simply, the fact that Ideanomics has more cash than debt is arguably a good indication that it can safely manage its debt. There is no doubt that we learn the most about debt from the balance sheet. But ultimately, the company’s future profitability will decide whether Ideanomics can strengthen its balance sheet over time. So if you are focused on the future you can check out this free report showing analysts’ earnings forecasts.
Over the past year, Ideanomics was not profitable on EBIT level, but managed to increase its revenue by 228%, to US $ 59 million. When it comes to revenue growth, it’s like winning the game by earning 3 points!
So, how risky is ideomy?
By their very nature, businesses that lose money are riskier than those with a long history of profitability. And over the past year, Ideanomics has recorded a loss of earnings before interest and taxes (EBIT), frankly. Indeed, during that time, he burned $ 35 million in cash and recorded a loss of $ 87 million. With just $ 289.7 million on the balance sheet, it looks like it will soon have to raise capital again. It is important to note that the revenue growth of Ideanomics is very promising. High growth nonprofits can be risky, but they can also offer great rewards. When analyzing debt levels, the balance sheet is the obvious starting point. But at the end of the day, every business can contain risks that exist off the balance sheet. We have identified 3 warning signs with Ideanomics (at least 1 of concern), and understanding them should be part of your investment process.
If you are interested in investing in companies that can generate profits without the burden of debt, check out this page. free list of growing companies that have net cash on the balance sheet.
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