In the world of finance, debt can be a double-edged sword. Inspirato (NASDAQ: ISPO) is currently grappling with significant financial obligations, as evidenced by its capital lease obligations totaling $258.8 million and non-current liabilities of $240.2 million. With total current liabilities reaching $245.2 million, the company’s net debt stands at $240.4 million, raising concerns about its financial health. Despite generating total revenue of $329.1 million, Inspirato's free cash flow has taken a hit, reporting a loss of $63.5 million. Investors should closely monitor these rising debt levels and the implications they may have on the company's future performance, especially in the competitive travel services industry. The stock is currently experiencing above-average trading activity. Inspirato's Current Ratio remains stable compared to the past year. As of August 3, 2024, Total Debt to Capitalization is projected to rise to 1.62, while the Price to Sales Ratio is expected to decrease by 0.04. Although many aggressive traders are entering the hotels, restaurants, and leisure sector, Inspirato may not be the top choice for everyone. We will assess why recent price movements for Inspirato suggest a potential bounce in September.
Inspirato financial leverage ratio helps determine the effect of debt on the overall profitability of the company. It measures the total debt position of Inspirato, including all of Inspirato's outstanding debt obligations, and compares it with the equity. In simple terms, the high financial leverage means the cost of production, together with running the business day-to-day, is high, whereas, lower financial leverage implies lower fixed cost investment in the business and generally considered by investors to be a good sign. So if creditors own a majority of Inspirato assets, the company is considered highly leveraged. Understanding the
composition and structure of overall Inspirato debt and outstanding corporate bonds gives a good idea of
how risky the capital structure of a business is and if it is worth investing in it. Please read more on our
technical analysis page.
Understanding Inspirato Total Debt
Inspirato liabilities are broken down into two parts on the balance sheet. These are short-term (or current) obligations and long-term debt. Inspirato has to fulfill its short-term liabilities in this reporting year and should be no more than 12 months old. Long-term debt, on the other hand, is anything beyond the 12-month payment timeframe. Common short-term liabilities found on Inspirato balance sheet include debt obligations and money owed to different Inspirato vendors, workers, and loan providers. Below is the chart of Inspirato main long-term debt accounts currently reported on its balance sheet.
You can use Inspirato
financial leverage analysis tool to get a better grip on understanding its financial position
How important is Inspirato's Liquidity
Inspirato
financial leverage refers to using borrowed capital as a funding source to finance Inspirato ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Inspirato financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Financial leverage can amplify the potential profits to Inspirato's owners, but it also increases the potential losses and risk of financial distress, including bankruptcy, if the firm cannot cover its debt costs. The degree of Inspirato's financial leverage can be measured in several ways, including by ratios such as the debt-to-equity ratio (total debt / total equity), equity multiplier (total assets / total equity), or the debt ratio (total debt / total assets). Please check the
breakdown between Inspirato's total debt and its cash.
Going after Inspirato Financials
The recent price roll up of Inspirato may raise some interest from investors. The stock closed today at a share price of
6.30 on
980,509 in trading volume. The company executives may have good odds in positioning the firm resources to exploit market volatility in
September. The stock standard deviation of daily returns for 90 days investing horizon is currently 9.5. The very high volatility is mostly attributed to the latest market swings and not very good earnings reports from some of the Inspirato partners.
Liabilities Breakdown
233 M
Total Current Liabilities
181.4 M
Non Current Liabilities Total
| Total Current Liabilities | 232.97 Million |
| Liabilities And Stockholders Equity | 249.76 Million |
| Non Current Liabilities Total | 181.36 Million |
| Non Current Liabilities Other | 2.31 Million |
"Debt is like any other trap; easy enough to get into, but hard enough to get out of." - Henry Wheeler Shaw. As of September, Inspirato (NASDAQ: ISPO) is grappling with significant financial challenges, highlighted by a current ratio of 0.55X, indicating potential liquidity issues. The company’s net debt stands at $240.4 million, while it reported losses of $51.8 million in net income and $53.1 million in operating income. With capital lease obligations totaling $258.8 million and a staggering probability of bankruptcy at 88.72%, investors should approach Inspirato with caution as it navigates these turbulent waters. The market capitalization of $28.38 million further underscores the financial strain, making it crucial for stakeholders to closely monitor the company's debt levels and overall financial health..
Time to short of Inspirato?
Inspirato's recent price surge, surpassing the $84.88 mark, raises questions about the sustainability of this upward momentum. While this increase may attract short-term traders seeking to capitalize on volatility, investors should consider the underlying fundamentals and market conditions that could affect future performance. With potential overvaluation concerns and broader economic factors at play, exploring shorting opportunities as the stock approaches these elevated levels may be prudent. As of August 3rd, Inspirato has a Risk Adjusted Performance of 0.0889, a downside deviation of 4.94, and a Market Risk Adjusted Performance of 0.9951.
Technical analysis of Inspirato allows investors to use historical prices and volume momentum to identify patterns that may indicate the direction of the stock's future prices.In conclusion, while Inspirato (ISPO) has faced challenges, the potential for a rebound is evident based on current valuations and analyst sentiment. With a fiscal year ending in December, the stock's real value is estimated at
13.12, significantly higher than its possible downside price of
0.063. Analysts maintain a consensus rating of "Buy," with the highest estimated target price reaching
37.74. Given these factors, investors may find Inspirato an attractive opportunity for growth, especially if the market begins to recognize its true value..
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Vlad Skutelnik is a Macroaxis Contributor. Vlad covers stocks, funds, cryptocurrencies, and ETFs that are traded in North America, focusing primarily on fundamentals, valuation and market volatility. He has many years of experience in fintech, predictive investment analytics, and risk management.
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