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Tuesday, May 30, 2023

World Wrestling Entertainment (NYSE: WWE ) could easily take on more debt

Legendary fund manager Li Lu (who is backed by Charlie Munger) once said, “The greatest investment risk is not the fluctuation of price, but whether you will suffer a permanent loss of capital.” So when you consider the When it comes to how risky you are, it may be obvious that you need to consider debt, as too much debt can bring a business down.like many other companies world wrestling entertainment (NYSE: WWE) take advantage of debt. But the real question is whether that debt puts the company at risk.

What risks does debt pose?

Debt is a tool to help businesses grow, but if a business can’t pay back its loans, then it’s at their mercy. If things go really bad, the lender can take control of the business. While this is less common, we do often see indebted companies permanently diluting shareholders as lenders force them to raise capital cheaply. Of course, many companies have used debt to finance growth without any negative consequences. When considering a company’s debt levels, the first step is to consider both its cash and its debt.

Check out our latest analysis for World Wrestling Entertainment

How Much Debt Does World Wrestling Entertainment Have?

The chart below shows that World Wrestling Entertainment has $235.4 million in debt as of December 2022, up from $222.8 million in one year. However, it did have $478.7 million in cash to offset this, resulting in net cash of $243.3 million.

NYSE: WWE Debt-Equity Swap History March 5, 2023

How healthy is World Wrestling Entertainment’s balance sheet?

Zooming in on the latest balance sheet data, we can see that World Wrestling Entertainment has $432.4 million in liabilities due within 12 months and $405.9 million in liabilities due after that. To offset these debts, it has $478.7 million in cash and $112.4 million in receivables due within 12 months. As a result, its liabilities exceed its cash and (recent) receivables combined by $247.2 million.

With the total value of publicly traded World Wrestling Entertainment stock at $6.22, it seems unlikely that this level of debt poses a significant threat. But with enough debt, we would definitely recommend shareholders to continue to monitor the balance sheet, going forward. While it does have notable liabilities, World Wrestling Entertainment also has more cash than debt, so we’re pretty confident it can manage debt safely.

We also warmly note that World Wrestling Entertainment’s EBIT rose 18% last year, making its debt load more manageable. Without a doubt, the debt we know the most from the balance sheet. But the most important factor in determining World Wrestling Entertainment’s ability to maintain a healthy balance sheet going forward is future earnings.So if you follow the future, you can look at this free A report showing analyst profit forecasts.

In the end, businesses need free cash flow to service debt; accounting profits just don’t cut it. World Wrestling Entertainment may have net cash on its balance sheet, but it will still be interesting to watch how well the business converts earnings before interest and taxes (EBIT) into free cash flow, as this will affect its needs and ability to manage debt. Over the last three years, World Wrestling Entertainment recorded free cash flow of 71% of its earnings before interest and taxes, which is close to normal because free cash flow excludes interest and taxes. This cold hard cash means it can reduce debt if needed.

add up

If investors are concerned about World Wrestling Entertainment’s liabilities, we can understand, but we can rest assured that it has $243.3 million in net cash. On top of that, converting 71% of EBIT into free cash flow resulted in $126 million in revenue. So is World Wrestling Entertainment’s debt at risk? Not so in our opinion. Without a doubt, the debt we know the most from the balance sheet. However, not all investment risk resides on the balance sheet — far from it. These risks can be difficult to spot.Every company has it, we found 1 World Wrestling Entertainment warning sign You should know.

If, after all, you’re more interested in a fast-growing company with a rock-solid balance sheet, then check out Our list of net cash growth stocks No delay.

Valuation is complicated, but we’re helping make it simple.

Find out if World Wrestling Entertainment is potentially overvalued or undervalued by reviewing our comprehensive analysis which includes Fair value estimates, risks and caveats, dividends, insider trading and financial health.

View free analysis

This article by Simply Wall St is general in nature. We use only an unbiased methodology to provide reviews based on historical data and analyst forecasts, and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock and does not take into account your objectives or your financial situation. Our goal is to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not take into account the latest price-sensitive company announcements or qualitative material. Simply Wall St has no positions in any of the stocks mentioned.

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