Debt to Equity is just one measure of indebtedness but the most...

Debt to Equity is just one measure of indebtedness but the most important measures are those that show how a company can service its debts, these being Interest Cover Ratio (ICR) and Leverage Ratio. AOG's total interest expense last year was $29.9m of which $25.6m was capitalised and only $4.3m expensed through the P&L. On forecast 2019 EBITDA of  $121.4 this gives an ICR of 4.1x.  Forecast 2020 EBITDA is $96.4m and assuming the same interest expense, gives an ICR of 3.2x.

While an ICR of 4x may be acceptable for REITS and other companies with long dated contractual revenues it definitely is not ok for a property developer.  Most companies will have a ICR covenant of a minimum 3x which means that AOG's EBITDA would only need to fall by 25% to breach their covenant. 25% fall in EBITDA may sound a lot but if the property market turns nasty then 25% will easily be breached given how dependant they are on new sales to generate revenue.

The trouble with quoting Debt to Equity is that it requires the asset value to be safe. And as we all know with AOG trading at 51% of book value, Mr Market is saying that the stated asset value on the balance sheet cannot be trusted.  

A company with an ICR of 4x, Leverage of 5.4X, and mkt cap only 30% more than it debt in the mist of a industry downturn is not a good place to pout your money