H2O America (HTO)

The solvency ratios of H2O America, based on the provided data, indicate a consistent financial position characterized by negligible or zero leverage and debt levels throughout the examined period. Specifically, the debt-to-assets ratio remains at zero from September 2020 through June 2025, suggesting that the company has not utilized external debt financing relative to its total assets. Similarly, both the debt-to-capital and debt-to-equity ratios are reported as zero across all dates, reinforcing the absence of debt financing and implying that the company's capital structure is solely composed of internal or equity funds.

The financial leverage ratio, however, is notably above 3.3 at all times, fluctuating within a narrow corridor from 3.14 to 3.57. This ratio indicates a moderate level of financial leverage, which may seem inconsistent with the zero debt ratios; however, in this context, it could reflect the use of non-debt forms of leverage, such as operating leverage, or accounting treatments that do not reflect traditional debt measures.

Overall, H2O America's solvency profile suggests minimal reliance on external debt, emphasizing internal equity or other financing methods. The stable zero ratios combined with a steady leverage indicate a conservative financial stance, potentially reducing financial risk. Nonetheless, the relatively high and stable leverage ratio implies that the company's operations may be structurally leveraged, emphasizing the importance of additional context for a comprehensive risk assessment.

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Coverage ratios

The interest coverage ratio of H2O America demonstrates a generally stable trend over the tested period, reflecting a consistent capacity to meet interest obligations from operating earnings. Beginning from a ratio of approximately 1.99 at September 30, 2020, the ratio exhibits gradual improvement, reaching as high as 2.67 by September 30, 2023. This indicates that, on average, operating earnings have been capable of covering interest expenses roughly two and a half to two and three-quarters times throughout this interval.

Despite minor fluctuations, the ratio remains comfortably above the critical threshold of 1.5, suggesting a relatively stable financial position with limited risk of interest payment difficulties. Notably, from Q3 2020 through Q3 2023, the trend indicates a moderate upward trajectory, signaling improvements in earnings or reductions in interest expenses or both. The ratio attains its peak in late 2023 and into mid-2024, aligning with periods of increased coverage.

After reaching 2.67 in September 2023, the ratio experiences a slight retreat to approximately 2.37 by the end of 2023, and minute declines continue into the first half of 2024, maintaining coverage levels above 2.3. These marginal decreases may suggest minor pressures on earnings or adjusted debt service costs but do not signify significant deterioration.

Overall, the data reveals that H2O America maintains a comfortable margin of interest coverage, indicative of solid financial stability and an ability to service interest commitments with consistent operational profitability. The trend underscores prudent risk management and an favorable outlook concerning interest obligations over the analyzed period.