Compared to a year ago, private companies appear to be taking on less debt as their profit margins continue to build strength.
According to its latest data, research firm Sageworks said companies filing annual statements between November 2012 and April 2013 reported annual sales growth of about 10%.
These companies also, on average, reported net profit margins close to 7%, a full two percentage points higher than the previous year.
In an analysis focusing on seasonal industries, several summer industries such as restaurants and sporting goods stores have posted higher sales growth rates during the past year than they did previously, said Sageworks in Raleigh, N.C.
Others, like gas stations, have seen a sharp drop in annual sales growth compared to last year.
Sageworks Chairman Brian Hamilton pointed out that the average probability of default for private companies appears to be headed in the right direction.
“Despite this improvement in creditworthiness, companies appear to be taking on less debt than a year ago,” Hamilton said. “The improvement in default rates coupled with healthy sales and profitability show that private companies may be well positioned to borrow.”
Sageworks said it collects data from its database of privately held company financial statements aggregated by industry. Each day, approximately 1,000 of these financial statements are collected from accounting firms, banks and credit unions through a cooperative data model with Sageworks’ clients, according to the firm.