Lumentum Holdings Inc (LITE)

The solvency ratios of Lumentum Holdings Inc show a fluctuating trend over the past five years. The debt-to-assets ratio has been increasing steadily, indicating that the company is relying more on debt financing compared to its total assets. This could potentially increase financial risk.

The debt-to-capital ratio has also been on the rise, showing that a larger portion of the company's capital structure is financed by debt. This suggests that the company may have a higher level of financial leverage, which could impact its ability to meet financial obligations.

Similarly, the debt-to-equity ratio has been increasing significantly over the years, indicating that the company has been relying more on debt to finance its operations compared to equity. This could potentially signal higher financial risk and dependence on external financing sources.

The financial leverage ratio has also been increasing, demonstrating that the company's use of debt as a source of financing has been rising. A higher financial leverage ratio implies a greater proportion of debt in the company's capital structure, which could lead to increased financial risk and vulnerability to economic downturns.

Overall, the increasing trend in these solvency ratios for Lumentum Holdings Inc suggests a gradual shift towards a more debt-heavy capital structure, which may pose challenges in terms of financial stability and ability to meet debt obligations in the future. It is important for investors and stakeholders to closely monitor these ratios and assess the company's overall solvency position.

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Coverage ratios

Lumentum Holdings Inc's interest coverage ratio has shown significant fluctuations over the past five years. In particular, the interest coverage ratio has deteriorated substantially from 2020 to 2024.

As of June 30, 2024, the interest coverage ratio is reported at -29.73, which indicates a concerning level of financial risk as the company's earnings are insufficient to cover its interest expenses. This steep decline from 2023 where the ratio was -1.88 suggests a significant deterioration in the company's ability to meet its interest obligations.

It is important to note that a negative interest coverage ratio, as observed in 2024, is a red flag to investors and creditors, signaling that the company is not generating enough operating income to cover its interest payments. This may raise questions about the company's financial health and ability to service its debt obligations.

In contrast, looking back to 2021, the interest coverage ratio stood at 7.94, indicating a healthier financial position with more than enough earnings to cover interest expenses. However, the ratio declined in 2022 and 2023, signaling potential challenges in generating sufficient earnings to cover interest costs.

Overall, the declining trend in Lumentum Holdings Inc's interest coverage ratio raises concerns about the company's financial stability and ability to manage its debt effectively. Investors and stakeholders should carefully monitor this metric to assess the company's ability to meet its interest obligations in the future.