© Reuters.
Investment expert Li Lu recently highlighted the risks associated with high debt levels in companies, cautioning investors not to underestimate the potential for permanent capital loss. This warning is particularly pertinent for Waste Connections (NYSE:), Inc., which has reported an increase in total debt to $6.84 billion as of September from $6.22 billion the previous year. The company’s liabilities are divided between short-term obligations of $1.58 billion and long-term commitments of $8.56 billion, with cash and receivables totaling a less significant $985.5 million.
Despite the rise in debt, Waste Connections boasts a substantial market capitalization of $34.6 billion, reflecting its ability to raise capital if necessary to manage its leverage effectively. The firm’s debt-to-EBITDA ratio remains at a manageable 2.8 times, and it maintains a robust interest coverage ratio, with EBIT able to cover interest expenses fivefold.
The company has also shown solid earnings growth, with an increase of 14% over the previous year. Additionally, Waste Connections demonstrates strong liquidity, evidenced by an impressive conversion rate of EBIT into free cash flow—83% over the past three years—suggesting that the company is well-positioned to meet its debt obligations without putting undue pressure on its resources.
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