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Li Lu, a fund manager backed by Berkshire Hathaway (NYSE:), has expressed concerns over Duke Energy Corporation’s (NYSE:NYSE:) increasing debt levels, suggesting the potential for significant investment risk. This perspective underscores the importance of examining a company’s debt when analyzing risk, with emphasis on the danger of permanent capital loss.
As of September 2023, Duke Energy’s debt stood at $78.5 billion. This marks an increase from $72.9 billion one year prior, with net debt remaining nearly identical due to limited cash reserves. The company’s balance sheet reveals short-term liabilities of $17.2 billion and long-term liabilities of $112.2 billion. These figures significantly outweigh its cash reserves of $428 million and receivables valued at $4.08 billion due within a year.
The risk level of Duke Energy is heightened due to its substantial debt. Poor debt management, resulting from inadequate capital raising or ineffective cash flow utilization, could lead to bankruptcy or shareholder dilution at lower share prices. It is noteworthy that such high levels of debt can pose a threat to the company’s financial health, potentially leading to permanent capital loss, a significant investment risk highlighted by Li Lu.
InvestingPro Insights
According to InvestingPro, Duke Energy operates with a significant debt burden, which aligns with the concerns expressed by Li Lu. Despite this, the company has managed to maintain a consistent dividend payment for the past 53 years, which is a testament to its financial resilience.
InvestingPro’s real-time data also reveals that Duke Energy has a market cap of $69.58 billion and a P/E ratio of 18.82 as of Q3 2023. The company’s revenue for the last twelve months as of Q3 2023 stands at $28.75 billion, reflecting a growth of 7.44%.
Moreover, InvestingPro Tips indicate that Duke Energy is a prominent player in the Electric Utilities industry and has been profitable over the last twelve months. This suggests that despite the high levels of debt, the company has managed to maintain steady revenue streams and profitability.
Finally, for those interested in further insights and tips, InvestingPro offers a plethora of additional data and tips related to Duke Energy and other companies.
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