The High Costs of Debt for AEG
A 7.6% Return On Equity (ROE) is not necessarily a guarantee of quality for investors. Aegis Brands Inc.'s (TSE:AEG) low ROE and significant use of debt may indicate financial leverage that can boost returns, but also increases risk. The company's reliance on borrowed capital to invest in growth highlights the need for careful consideration of its financial health. This situation underscores the importance of evaluating a company's overall financial position beyond just its profitability ratio.
- A high debt-to-equity ratio like AEG's poses significant risks if credit markets were to tighten, potentially limiting the company's ability to take on new debt and invest in growth.
- How will changes in interest rates or market conditions impact Aegis Brands' access to affordable capital and its ability to maintain its current investment strategy?