Lumentum Holdings Inc (LITE)

The analysis of Lumentum Holdings Inc.'s solvency ratios, based on the provided data, reveals a consistent pattern of minimal or nonexistent leverage across multiple key metrics. The Debt-to-Assets, Debt-to-Capital, and Debt-to-Equity ratios are all reported as zero for every period from September 30, 2020, through June 30, 2025. This indicates that the company has maintained a zero-level of reported debt in these categories throughout the observed timeframe, suggesting that it either operates entirely with equity financing or employs alternative sources of capital not classified as debt.

Further insight is provided by the financial leverage ratio, which shows a gradual increase over time. Starting at approximately 1.87 in September 2020, the ratio fluctuates but demonstrates a notable upward trend, reaching around 4.55 by December 2024. The ratio's rise implies that, despite the absence of reported debt, the company's capital structure is increasingly leveraged relative to its equity base, possibly through other financial arrangements, operational strategies, or the inclusion of off-balance-sheet items not captured in the ratios.

The absence of debt-related ratios suggests that Lumentum Holdings has maintained a conservative or debt-free capital structure during this period. The increasing financial leverage ratio, however, highlights a potential shift towards greater operational or financial gearing, which could reflect strategic investments, acquisitions, or other financial maneuvers that do not manifest as traditional debt on the balance sheet.

In summary, Lumentum Holdings Inc. has demonstrated a stable record of no reported leverage in terms of debt ratios over the analyzed period, while the rising financial leverage ratio indicates an evolving capital structure that warrants monitoring for potential future implications on solvency and financial stability.

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Coverage ratios

The analysis of Lumentum Holdings Inc.'s interest coverage ratio over the specified period reveals a significant deterioration in the company's ability to meet its interest obligations from September 2020 through June 2025. Initially, the interest coverage ratio was relatively healthy, rising from approximately 4.04 in September 2020 to a peak of 8.09 in September 2021, indicating the company was comfortably covering its interest expenses by a factor of roughly four to eight times.

However, starting from the period ending December 2021, a consistent downward trend emerged. The ratio decreased progressively, reaching 1.91 by December 2022, suggesting that the company's earnings before interest and taxes (EBIT) were approaching levels insufficient to cover interest expenses comfortably.

This declining trend accelerated sharply through 2023 and into 2024. By March 2023, the ratio dropped to a mere 0.65, indicating EBIT was only slightly covering interest expenses. The situation worsened into the negative territory, with the ratio falling to -1.84 in June 2023 and further declining to -13.04 by September 2024, reflecting that EBIT was not only insufficient to cover interest but also that interest expenses exceeded EBIT, contributing to increasing interest coverage deficits.

The persistent negative ratios from late 2023 onward show that the company has faced substantial challenges in generating sufficient earnings to cover its interest obligations. The negative values imply that interest expenses are not being met by operating income, suggesting potential financial distress or significant restructuring implications. This deterioration could impact further borrowing capacity, investor confidence, and overall financial stability, marking a critical concern for stakeholders analyzing the company's financial health.