Debt MetricsDisclosure: I also own TVK. GLTA
I'm looking at metrics for TVK and cannot understand the market's lack of concern over what appears to be a very high amount of debt. I use the Lynch guidance that Long Debt / Total Equity should ideally be < 0.25. In TVK's case I calculate 1.03, which appears to be in line with the 5i Report on TVK showing Total Debt / Equity at 1.49. In the same report WELL is cited as a Comp but WELL has a Total Debt / Equity metric of "only" 0.5 - fully 3x better than TVK, and yet WELL has been punished for having too much debt. We think using net debt/EBITDA would give investors a proper picture of how leveraged these serial acquirers are relative to their earning capability. The current net debt/EBITDA is as follows:
TVK: 2.5x
WELL: 3.7x
That said, WELL is a much more predictable business, therefore, able to support a higher debt level. We think WELL is cheap and the market should start to recognize its value. (5iResearch)