skip to content
  1. Home
  2. >
  3. Questions
  4. >
  5. TVK: I'm looking at metrics for TVK and cannot understand the market's lack of concern over what appears to be a very high amount of debt. [TerraVest Industries Inc.]
You can view 2 more answers this month. Sign up for a free trial for unlimited access.

Investment Q&A

Not investment advice or solicitation to buy/sell securities. Do your own due diligence and/or consult an advisor.

Q: I'm looking at metrics for TVK and cannot understand the market's lack of concern over what appears to be a very high amount of debt. I use the Lynch guidance that Long Debt / Total Equity should ideally be < 0.25. In TVK's case I calculate 1.03, which appears to be in line with the 5i Report on TVK showing Total Debt / Equity at 1.49. In the same report WELL is cited as a Comp but WELL has a Total Debt / Equity metric of "only" 0.5 - fully 3x better than TVK, and yet WELL has been punished for having too much debt. Confused...
Asked by Paul on May 15, 2024
5i Research Answer:

We think using net debt/EBITDA would give investors a proper picture of how leveraged these serial acquirers are relative to their earning capability. The current net debt/EBITDA is as follows:

TVK: 2.5x

WELL: 3.7x

That said, WELL is a much more predictable business, therefore, able to support a higher debt level. We think WELL is cheap and the market should start to recognize its value.