Mercury Systems Inc (MRCY)

The analysis of Mercury Systems Inc.'s solvency ratios over the specified period reveals several key insights. The Debt-to-assets ratio, Debt-to-capital ratio, and Debt-to-equity ratio remained consistently at zero from June 30, 2021, through June 30, 2024, indicating an absence of leverage attributable to debt during these years. No data is available beyond June 2024, preventing assessment for 2025, but the pattern suggests that the company has operated without employing debt financing in this timeframe.

The Financial leverage ratio provides additional context. It increased from 1.32 in June 2021 to 1.53 by June 2023, reflecting a moderate rise in the use of financial leverage, albeit within a conservative range. The ratio further increased to 1.62 in June 2024, implying some incremental increase in leverage, although it remains relatively low and suggests conservative debt utilization. Notably, the ratio shifts to -0.01 in 2025, which is uncommon and may indicate a change in accounting methodology, a correction, or significant financial restructuring, but without additional information, it is difficult to interpret precisely.

Overall, the data indicate that Mercury Systems Inc. maintained a debt-free capital structure throughout most of the period evaluated, suggesting a high degree of financial stability and potentially low financial risk from leverage. The relatively stable and low leverage ratios imply that the company relies predominantly on equity or internal funds for its operations and growth initiatives.

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Coverage ratios

The interest coverage ratio for Mercury Systems Inc exhibits significant variation over the analyzed period. As of June 30, 2021, the company maintained a very high interest coverage ratio of 78.72, indicating robust earnings relative to interest obligations and suggesting a strong capacity to meet interest expenses comfortably at that time. By June 30, 2022, the ratio declined markedly to 12.14, still indicating adequate coverage but reflecting a substantial decrease in earnings relative to interest expenses.

However, the trend deteriorates drastically over the subsequent years. As of June 30, 2023, the ratio falls into negative territory at -0.93, signaling that the company's earnings before interest and taxes (EBIT) were insufficient to cover interest expenses, resulting in an interest coverage below one. This decline indicates that the company was experiencing earnings challenges, jeopardizing its ability to meet interest obligations solely from operating income.

The downward trend continues into June 30, 2024, with the ratio reaching -4.41, further emphasizing a situation where the company’s operating income is significantly inadequate to cover interest expenses. Similarly, as of June 30, 2025, the ratio remains negative at -3.04, maintaining the trend of EBIT insufficient to sustain interest payments.

Overall, the analysis reflects a concerning deterioration in Mercury Systems Inc’s capacity to service its interest obligations over the recent years. The shift from a comfortably covered interest ratio in 2021 to negative ratios in subsequent years suggests escalating financial distress, potentially attributable to declining earnings, increased interest expenses, or other financial challenges impacting operational profitability.