Lumentum Holdings Inc (LITE)

The analysis of Lumentum Holdings Inc.'s solvency ratios based on the provided data indicates a consistent absence of leverage derived from debt. Specifically, the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio are all recorded at 0.00 for each year from June 30, 2021, through June 30, 2025. This suggests that the company has maintained an entirely debt-free capital structure over this period, relying solely on equity financing without external debt obligations.

Conversely, the financial leverage ratio demonstrates varying degrees of leverage, with values increasing from 1.80 in 2021 to a peak of 4.11 in 2024 before slightly decreasing to 3.72 in 2025. This ratio measures the extent to which the company utilizes total assets relative to equity, indicating that despite the absence of debt, Lumentum has employed leverage through other means, possibly via assets financed entirely by equity or internal funds. The rising trend in the financial leverage ratio from 2021 to 2024 suggests an increasing degree of asset utilization relative to shareholder equity, which could reflect operational expansion, asset accumulation, or strategic leveraging without incurring debt.

In summary, Lumentum Holdings Inc. exhibits an unusual and noteworthy capital structure pattern characterized by zero recorded debt ratios across multiple years, coupled with an increasing financial leverage ratio. This suggests an approach where the company maintains a debt-free status while actively leveraging its assets internally or through equity to support growth and operational objectives.

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Coverage ratios

The interest coverage ratio for Lumentum Holdings Inc. demonstrates a declining trend over the specified period from June 30, 2021, through June 30, 2025.

In fiscal year 2021, the company exhibited a strong ability to cover its interest expenses, with a ratio of 7.94, indicating that operating earnings were nearly eight times interest obligations. By fiscal year 2022, this ratio declined significantly to 3.93, reflecting reduced earning capacity relative to interest expenses but still maintaining a healthy coverage.

However, the situation deteriorated markedly in subsequent years. For June 30, 2023, the interest coverage ratio turned negative at -1.88, indicating that operating earnings were insufficient to cover interest expenses, and the company likely incurred losses or experienced a highly reduced operating profit. The trend continued worsening in fiscal year 2024, with a ratio of -11.00, suggesting substantial operating losses or a significant decline in earnings relative to interest obligations, implying severe financial distress.

This negative trajectory persisted into the projected fiscal year 2025, with the ratio slightly improving to -8.07 but remaining well below zero, further confirming ongoing challenges in generating sufficient earnings to meet interest commitments.

Overall, the deterioration in interest coverage ratios over these periods underscores a significant decline in the firm's earnings capacity, transitioning from a comfortable margin in 2021 to a position of financial distress in subsequent years, likely signaling operational difficulties or losses that impair the company's ability to service its debt obligations without external financial support or restructuring.