The Atlanta Braves are unique in Major League Baseball as they are the only team that has to open their books as a publicly-traded company. This has lead to quarterly earnings calls that are indecipherable to the vast majority of the population and attempts to figure out exactly what those facts and figures mean for the Braves on the field. However, a recent analysis of the Braves' stock price and company characteristics suggests that a significant problem could be lurking on Atlanta's books.
We know that the Braves have some long-term deals on their payroll of varying quality. While each of those deals were lauded at the time at being good values, nine figure deals still add up and has led to the Braves having a payroll that is somewhat restricted for years to come.
As it turns out, those payroll debts may only be the beginning of the organization's issues. An analysis by Simply Wall St. of the Braves' current stock price and overall performance revealed that there is an argument that the Braves may be overvalued right now and that their debt-to-equity ratio could cause problems down the road.
Braves' rosy revenue numbers may be hiding very real debt issues that could bite them
By all accounts, the Braves' top line revenue numbers have been extremely encouraging and have led to increasingly high valuations of the franchise. Investors seem happy, the Braves seem happy, and fans seem happy. However, that is not the whole story.
Simply Wall St. spends a good bit of time explaining why Atlanta's current stock price may be inflated and based on growth forecasts that are, at best, difficult to reach and complete flights of fancy at worst. That requires a level of understanding of the stock market and business that we don't want to dabble too much in.
However, the easy thing to understand is that the Braves have debt. A lot of debt. Between payroll obligations as well as loans related to the team's real estate and commercial operations, Atlanta's debt-to-equity ratio sits at 133%. For reference, Simply Wall St. says that companies generally want to stay below 40% to avoid being over-leveraged. The Braves are over three times more than that threshold.
Now, the Braves may not see a problem and it may not be a problem. As loans get paid off, high profile contracts come off the books, and more sources of revenue get established, that debt number will go down dramatically and Liberty Media is a very deep-pocketed owner that is more than capable of weathering short-term losses.
However, if the economy becomes tough and real estate holdings take a beating, that could spell trouble. After all, fans spend discretionary income on sports and going to games. If there isn't much discretionary cash around anymore, all of that debt the Braves have could become an albatross around their neck. If you need proof, check out the Twins and what their debt did to the team as well as their owners' attempts to sell the team.