Backlog and Market Cap to Debt Ratios for Major Homebuilders
Following up on posts One and Two about homebuilder ratios.
Debt-to-backlog. Having debt that is a higher multiple of backlog (the dollar amount of outstanding orders for homes) is troublesome. Consider that the amount of cash for paying down debt is going to be a fraction of the backlog
Debt-to-market cap. A measure of the amount of financial leverage.
One thing to keep in mind is that the data not consider off-balance sheet debt, so the amount of debt is understated. The understatement is not necessarily equal - certain builders use more joint ventures to control land. Also, certain builders have more contingent liability for their off-balance sheet debt.
Also, significant numbers of orders in the backlogs will probably cancel. Some builders are better than others at converting the backlog into cash.
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3 comments:
Please write an article explaining how many liabilities allowed to kept off-balance-sheet. I know there is probably some loophole-law involved, but please explain why it allowed, as it amounts to lying, repeat, lying about the true financial status of a company. Thank you.
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jhazline_20
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My father is in a homebuilder company and their financial status are touching sky. So they also do convert backlog to cash because having higher backlog could be troublesome.
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eva
Credit Card Debt
Great blog with lots of useful information and excellent commentary! Thanks for sharing.
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Allen
Credit Card Debt
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