| | | Another aspect to consider with regard to a company's "Debt" is to interrogate what that debt is actually costing the company in terms of its "Interest Expense" as detailed on its Income Statement.
That, IMO, is what is reducing the company's Total Revenue and thereby reducing the company's final Net Income number which, in turn, reduces the amount of Revenue which gets added to the "Retained Income" on the company's Balance Sheet which, in turn, determines how much Total Assets exceed Total Liabilities, as per the Balance Sheet equation of :- Share Capital + Retained Income = Total Assets - Total Liabilities.
Personally, I don't like to see the ratio of "Interest Expense/EBITDA" to be greater than around 15%.
If we look at NXRT's LTM Income Statement (as per 'TIKR') we see the above ratio being 59.66/125.84 = 47.4% which is 3 times higher than my target. In other words Debt Expense is eating up 47.4% of NXRT's Revenue at the EBITDA level.
In addition NXRT is showing an LTM Net Income loss of -$49.71mil. which its Debt Expense has no doubt largely contributed to, and which is not doing its Balance Sheet any good. |
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