Net Gearing, or Net Debt to Equity, is a measure of a company's financial leverage. It is calculated by dividing its net liabilities by stockholders' equity. This is measured using the most recent balance sheet available, whether interim or end of year and includes the effect of intangibles.
Stockopedia explains Net Gearing
The formula is : (Total Debt - Cash) / Book Value of Equity (incl. Goodwill and Intangibles). It uses the book value of equity, not market value as it indicates what proportion of equity and debt the company has been using to finance its assets. If the value is negative, then this means that the company has net cash, i.e. cash at hand exceeds debt.
The gearing ratio shows how encumbered a company is with debt. Depending on the industry, a gearing ratio of 15% might be considered prudent, while anything over 100% would certainly be considered risky or 'highly geared'. As a general rule, net gearing of 50% + merits further investigation, particularly if it is mostly short-term debt.
A highly-geared company is more vulnerable to a sudden bump in the road, either operationally or due a change in the economy (e.g. a recession or an increase in interest rates).
Ranks: Low to HighUnit: %Available in screenerAvailable as Table Column
The 5 highest Net Gearing Stocks in the Market
Ticker | Name | Net Gearing | StockRank™ |
---|---|---|---|
LON:VCP | Victoria | 1,307.00% | 19 |
LON:WIZZ | Wizz Air Holdings | 1,509.90% | 37 |
LON:888 | 888 Holdings | 1,867.96% | 77 |
LON:WPHO | Windar Photonics | 2,634.65% | 14 |
LON:IWG | Iwg | 17,505.88% | 67 |
Variants of Net Gearing
Related Fields
- Free Cash Flow to Long Term Debt
- Altman Z-Score
- Net Debt to Tangible Equity
- Long Term Debt to Equity
- Altman Z2-Score
- Gross Gearing
- Assets to Equity Ratio
- Gross Gearing excluding Intangibles
- Gross Gearing inc Pension
- Debt to Assets
- Net Gearing inc Pension
- Long Term Debt to Assets
- Cash to Assets inc Pension
- Long Term Debt to Average Assets
- Net Debt to Assets
- Pension Deficit to Market Cap
- Net Debt to Tangible Assets
- Pension Deficit
- Tangible Assets to Equity Ratio