Corporate Uses of Cash

September 07, 2016 by Ehren Stanhope

Quite often, investors get mired in the particulars of individual stocks. Sometime its best to take a step back to observe broad trends. Looking at corporate uses of cash over the last two decades, with a focus on the last few years, findings suggest that it is more important than ever for equity investors to evaluate quality metrics like balance sheet strength, quality of earnings, and corporate allocation policies.

The exploitation of easy money

June 19, 2015 by Ehren Stanhope

Rock bottom interest rates and easy money are nothing new to corporations. The cost of debt capital is hitting 50 year lows across the board. But who has taken advantage and how aggressively?

A paradigm shift for profit margins

June 05, 2015 by Ehren Stanhope

Corporate executives have two key objectives: generating profits and allocating firm capital to maximize those profits. A key consideration is whether to finance those objectives through operating cash flow, debt issuance or equity issuance. Given that interest rates are at all time lows and the FOMC is poised to tighten monetary policy, investors should understand the impact of rising interest rates on corporate earnings and profit margins. Below, I look at trends in profit margins, the cost of debt over the last five decades, and the implications for earnings.