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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Harshu Vyas who wrote (73872)	10/5/2023 1:57:58 PM
From: Spekulatius	Respond to of 78717

BGS - way to much debt - ~7x Debt/ EBITDA. They were always running with too much debt. The higher interest rates are not good for them at all. Also, much of their business are not that great and undifferentiated (imo).

To: Harshu Vyas who wrote (73872)	10/5/2023 2:36:38 PM
From: Elroy	Read Replies (1) \| Respond to of 78717

To me, margins are low and debt is too large. A 10% operating margin isn't enough. Do you have financial analysis to support this view that debt is too large, or it's just a feeling? Just a quick glance by me says - BGS has about $2.3 billion long term debt. They just refinanced some of it at 8%. So lets say it's all now at 8% (it's not, it's mostly lower), then annual interest expense would be about $200m. BGS's guidance for 2023 EBITDA is $320m. $320m is more than $200m. In fact, there's $120m leftover. So......it seems like they have the EBITDA to service $2.3 billion debt if it were at 8% (which it is not). Share out are 72 million. The current dividend is 76 cents per year. So the dividend will consume $50m of the EBITDA cash. Income taxes vary with profits, last year they had $300m EBITDA (about the same as this year's forecast), but net income was negative. So on current revenue levels perhaps income tax is zero. So.......why is the debt "too high"? If they can service the debt, it's not too high, it is what it is. A company can do a lot of stuff with $320m EBITDA. And I don't really know, but 10% operating margin for selling food actually sounds high to me. PC's get 3% operating margin, food would (I would think) be really low in operating margin as the world wants food cheaper and cheaper and cheaper and cheaper.