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How Does Textainer Group's Debt Look?

Benzinga Insights
·2 min read

Over the past three months, shares of Textainer Group Holdings (NYSE: TGH) rose by 68.01%. Before having a look at the importance of debt, let us look at how much debt Textainer Group Holdings has.

Textainer Group Holdings's Debt

Based on Textainer Group Holdings’s financial statement as of March 30, 2020, long-term debt is at $3.56 billion and current debt is at $242.43 million, amounting to $3.80 billion in total debt. Adjusted for $180.55 million in cash-equivalents, the company's net debt is at $3.62 billion.

Let's define some of the terms we used in the paragraph above. Current debt is the portion of a company's debt which is due within 1 year, while long-term debt is the portion due in more than 1 year. Cash equivalents include cash and any liquid securities with maturity periods of 90 days or less. Total debt equals current debt plus long-term debt minus cash equivalents.

Investors look at the debt-ratio to understand how much financial leverage a company has. Textainer Group Holdings has $5.20 billion in total assets, therefore making the debt-ratio 0.73. As a rule of thumb, a debt-ratio more than one indicates that a considerable portion of debt is funded by assets. A higher debt-ratio can also imply that the company might be putting itself at risk for default, if interest rates were to increase. However, debt-ratios vary widely across different industries. A debt ratio of 25% might be higher for one industry and normal for another.

Importance Of Debt

Besides equity, debt is an important factor in the capital structure of a company, and contributes to its growth. Due to its lower financing cost compared to equity, it becomes an attractive option for executives trying to raise capital.

However, due to interest-payment obligations, cash-flow of a company can be impacted. Equity owners can keep excess profit, generated from the debt capital, when companies use the debt capital for its business operations.

Looking for stocks with low debt-to-equity ratios? Check out Benzinga Pro, a market research platform which provides investors with near-instantaneous access to dozens of stock metrics - including debt-to-equity ratio. Click here to learn more.

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