DXP Enterprises Inc (DXPE)
Financial leverage ratio
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 1,177,440 | 1,037,280 | 894,227 | 868,131 | 788,220 |
| Total stockholders’ equity | US$ in thousands | 380,879 | 365,392 | 346,674 | 360,338 | 353,786 |
| Financial leverage ratio | 3.09 | 2.84 | 2.58 | 2.41 | 2.23 |
December 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $1,177,440K ÷ $380,879K
= 3.09
DXP Enterprises Inc's financial leverage ratio has been gradually increasing over the past five years, indicating a rising trend in the company's level of financial leverage. This suggests that the company has been relying more on debt financing compared to equity financing to support its operations and growth.
A financial leverage ratio of 3.09 as of December 31, 2023, means that for every dollar of equity, the company has approximately $3.09 of debt. This high level of leverage implies that DXP Enterprises Inc has a significant amount of debt relative to its equity, which can increase its financial risk and vulnerability to economic downturns or changes in interest rates.
Furthermore, the increasing trend in the financial leverage ratio indicates that the company's debt levels have been growing at a faster pace than its equity over the years. While debt can be beneficial in funding growth and expansion, it also comes with obligations such as interest payments and repayment of principal, which can strain the company's financial resources if not managed effectively.
Investors and creditors typically monitor the financial leverage ratio as a measure of a company's ability to meet its debt obligations and assess its overall financial health. A high financial leverage ratio may signal potential concerns about the company's financial stability and solvency, while a lower ratio may indicate a more conservative capital structure.
It is important for DXP Enterprises Inc to carefully manage its debt levels and balance its financing mix to maintain a sustainable capital structure that supports its growth objectives while also mitigating excessive financial risk. Regular monitoring of the financial leverage ratio and its trend can help stakeholders assess the company's leverage position and make informed decisions regarding investment or lending activities.
Peer comparison
Dec 31, 2023