These 4 metrics indicate that Amtech Systems (NASDAQ: ASYS) is using debt intensively
Some say volatility, rather than debt, is the best way to think about risk as an investor, but Warren Buffett said “volatility is far from risk.” 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. We can see that Amtech Systems, Inc. (NASDAQ: ASYS) uses debt in its business. But the most important question is: what risk does this debt create?
What risk does debt entail?
Generally speaking, debt only becomes a real problem when a company cannot repay it easily, either by raising capital or with its own cash flow. Ultimately, if the company cannot meet its legal debt repayment obligations, shareholders could walk away with nothing. However, a more common (but still costly) situation is where a company has to dilute its shareholders at a cheap share price just to get its debt under control. Of course, debt can be an important tool in businesses, especially capital intensive businesses. When we look at debt levels, we first consider both cash and debt levels.
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What is Amtech Systems’ debt?
The image below, which you can click for more details, shows Amtech Systems owed $ 4.89 million in debt at the end of June 2021, a reduction from $ 5.27 million. US over one year. However, it has $ 37.0 million in cash offsetting that, leading to a net cash of $ 32.1 million.
A look at the responsibilities of Amtech Systems
We can see from the most recent balance sheet that Amtech Systems had liabilities of US $ 15.6 million maturing within one year and liabilities of US $ 16.5 million maturing within one year. of the. On the other hand, it had US $ 37.0 million in cash and US $ 22.0 million in receivables due within one year. So he actually has $ 27.0 million Following liquid assets as total liabilities.
It is good to see that Amtech Systems 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. In short, Amtech Systems has net cash, so it’s fair to say that it doesn’t have a lot of debt!
Shareholders should know that Amtech Systems’ EBIT fell 49% last year. If this profit trend continues, paying off debt will be about as easy as driving cats on a roller coaster. The balance sheet is clearly the area to focus on when analyzing debt. But ultimately, the company’s future profitability will decide whether Amtech Systems can strengthen its balance sheet over time. So if you are focused on the future you can check this out free report showing analysts‘ earnings forecasts.
Finally, a business can only repay its debts with hard cash, not with book profits. Although Amtech Systems has net cash on its balance sheet, it is still worth examining its ability to convert earnings before interest and taxes (EBIT) into free cash flow, to help us understand how fast it is building. (or erode) this cash balance. Over the past three years, Amtech Systems has spent a lot of money. While this may be the result of spending on growth, it makes debt much riskier.
While we sympathize with investors who find debt of concern, you should keep in mind that Amtech Systems has net cash of US $ 32.1 million, as well as more liquid assets than liabilities. . So while Amtech Systems doesn’t have a good track record, it’s certainly not bad. Given our reservations on the company’s balance sheet, it seems wise to check whether any insiders have sold any shares recently.
Of course, if you are the type of investor who prefers to buy stocks without going into debt, feel free to check out our exclusive list of cash net growth stocks today.
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