Coty Inc (COTY)

The analysis of Coty Inc.'s solvency ratios over the specified period reveals a consistent absence of debt as a proportion of total assets, capital, and equity. The Debt-to-assets ratio, Debt-to-capital ratio, and Debt-to-equity ratio are all recorded at zero for each date from June 30, 2021, through June 30, 2025. This indicates that the company has not utilized any long-term or short-term debt financing within this timeframe, suggesting an entirely equity-funded capital structure.

Contrastingly, the Financial leverage ratio presents a different picture. It remains elevated, with values oscillating between 3.20 and 3.67 during the period analyzed. A leverage ratio in this range indicates that Coty Inc. employs a significant amount of financial leverage relative to its equity base, possibly through other forms of liabilities or operating leverage not captured in these ratios. The stability of this ratio over time suggests a consistent utilization of leverage mechanisms that do not involve traditional debt instruments, or that the company’s financial structure is characterized by high operational leverage.

Overall, the data implies that Coty Inc. maintains a very conservative approach to debt, with no recorded debt at the specified dates, while simultaneously exhibiting a high degree of financial leverage primarily driven by other factors. This could reflect strategic financial planning to minimize debt obligations, or it might indicate reliance on internal funding and non-debt liabilities. The high leverage ratio, despite the absence of traditional debt, warrants further investigation into the company’s operational and non-debt liabilities to fully understand the leverage profile.

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Coverage ratios

The interest coverage ratio for Coty Inc. demonstrates significant variability over the analyzed period from June 30, 2021, to June 30, 2025. As of June 30, 2021, the ratio was notably low at 0.08, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses, reflecting a potential concern regarding liquidity and financial stability at that point in time.

By June 30, 2022, the ratio experienced a substantial improvement, rising to 1.41. This represents a meaningful recovery, suggesting that the company’s EBIT was approximately 1.41 times its interest obligations, thus enhancing its capacity to meet interest payments compared to the previous year. The upward trend continued into June 30, 2023, with the ratio reaching 2.06, which indicates a more comfortable margin for covering interest expenses, and a generally healthier financial position in terms of debt servicing capacity.

In the subsequent year, June 30, 2024, the ratio decreased slightly to 1.70, but remained well above the critical threshold of 1.0, signifying that EBIT still exceeds interest expenses, albeit with less buffer than the previous year. This suggests some deterioration in the company's ability to generate earnings proportionate to its interest obligations, though it still maintains adequate coverage.

Finally, by June 30, 2025, the interest coverage ratio falls to zero, indicating that the company’s EBIT is insufficient to cover its interest expenses entirely. This could reflect an adverse financial condition, potentially due to earnings decline, increased interest expenses, or both. Such a situation warrants close monitoring, as it suggests the company may face difficulties in meeting its debt obligations without additional financial restructuring or improving earnings.

Overall, the trend shows initial severe undercoverage in 2021, followed by progressive improvement through 2023, but with a concerning decline into 2024 and 2025, ultimately reaching a point where interest coverage becomes non-existent. This pattern underscores the importance of evaluating underlying earnings and debt management strategies in assessing Coty Inc.’s financial health and risk profile.