Medical Waste Management Co - Debt/EBITDA = 2.40x - How levered?
PE
(Senior Baboon, 218
Points)
on 6/21/12 at 2:29pm
Medical Waste Management company's (Stericycle's) debt is 2.40x EBITDA.
Is that pretty heavily levered? Or not so much? Bad or good or normal?
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I'd say normal to good since
I'd say normal to good since it seems to be pretty asset-heavy for the most part. 4x or 5x sets off some alarms.
Doesn't seem very levered at
Doesn't seem very levered at all, at quick glance. Capex is in the neighborhood of 10% of EBITDA, which is generally low. Not sure how cyclical it is, that's certainly a factor.
For non-cyclical, low capex (less than 20% of EBITDA) businesses, all else being equal, 4x total leverage is a good ceiling for a transaction.
I would also bet they have
I would also bet they have some contract revenue, which should assuage fears on the top line.
Probably good-to-normal, as
Probably good-to-normal, as mentioned above.
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Really depends. On an
Really depends. On an absolute level, it's not bad, but you have to consider a few factors:
1. where's ebitda going near term - if ebitda drops then suddenly your leverage just blew up
2. what's the overall ev/ebitda - this matters cause if your ev/ebitda is, for example, 3.0x, you have much less equity below you compared to if your ev/ebitda was 10.0x
3. can the company lever up/have the capacity to do it quickly? - thinking about undrawn revolvers, and going in more depth, how much more debt they can take on (limitations on indebtedness, accordion, incremental, etc)
obviously if you're just taking a quick glance at the company you don't need to worry about all the factors above, but if you really want to examine leverage you have to consider all the factors from a business perspective to credit doc perspective and more.