ESCO Technologies Inc (ESE)
Financial leverage ratio
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 1,683,210 | 1,654,460 | 1,577,340 | 1,370,190 | 1,466,700 |
| Total stockholders’ equity | US$ in thousands | 1,131,140 | 1,048,160 | 1,019,700 | 959,026 | 826,222 |
| Financial leverage ratio | 1.49 | 1.58 | 1.55 | 1.43 | 1.78 |
September 30, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $1,683,210K ÷ $1,131,140K
= 1.49
The financial leverage ratio, also known as the equity multiplier, measures the proportion of a company's assets that are financed by debt compared to its equity. A higher financial leverage ratio indicates a higher level of financial risk, as the company is relying more on debt to finance its assets.
For Esco Technologies, Inc., the financial leverage ratio has fluctuated over the past five years. In 2019, the ratio was at its highest point of 1.78, indicating a higher reliance on debt to finance the company's assets. This suggests a higher financial risk and potential vulnerability to changes in interest rates or debt servicing costs.
In the following years, the financial leverage ratio decreased, reaching its lowest point of 1.43 in 2020. This decrease could indicate a shift towards a more conservative capital structure, with a greater emphasis on equity financing over debt. A lower financial leverage ratio can signify a reduced financial risk and enhanced financial stability.
However, in 2021 and 2022, the financial leverage ratio increased to 1.55 and 1.58, respectively, suggesting a reversal in the trend towards a more conservative capital structure. This upward trend could indicate a strategic decision to utilize more debt financing, possibly to fund expansion or investment opportunities.
As of September 30, 2023, the financial leverage ratio stood at 1.49, indicating a slight decrease from the previous year but remaining relatively higher compared to 2020. This level suggests that Esco Technologies, Inc. still maintains a significant reliance on debt to finance its assets, potentially exposing the company to higher financial risk.
In conclusion, Esco Technologies, Inc.'s financial leverage ratio has exhibited fluctuations over the past five years, indicating varying levels of reliance on debt to fund its assets. It is essential for investors and stakeholders to monitor this ratio closely to assess the company's capital structure decisions and their implications for financial risk and stability.
Peer comparison
Sep 30, 2023