Neogen Corporation (NEOG)

The analysis of Neogen Corporation's solvency ratios over the period from May 2021 to May 2025 reveals a consistent pattern of negligible debt levels. Specifically, the debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio are reported as zero across all observed fiscal years, indicating that the company has not utilized debt financing during this timeframe. This suggests a net equity-based capital structure with no reliance on borrowed funds, which affects the company's leverage profile and overall financial risk.

In contrast, the financial leverage ratio exhibits a gradual increase over the period, starting at 1.09 in May 2021 and rising to 1.66 by May 2025. This upward trend indicates an increasing level of financial leverage, implying that while debt remains absent, the company may be employing other means—such as operational or off-balance-sheet strategies—to amplify its asset base relative to equity. The rising leverage ratio warrants further investigation into asset management and other leverage-related practices, but it does not currently reflect traditional debt-driven leverage given the zero debt ratios.

Overall, Neogen Corporation displays a stable zero-debt profile through the examined years, complemented by a modest but consistent increase in financial leverage that does not arise from traditional borrowing. This capital structure approach underscores a conservative financing stance with minimal debt-related risk, reinforced by the absence of tangible liabilities in the debt ratios.

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Coverage ratios

The interest coverage ratio for Neogen Corporation has experienced significant fluctuations over the analyzed period. As of May 31, 2021, the ratio was approximately 990.44, indicating an extremely robust ability to service interest expenses relative to operating earnings. This high ratio suggests that, at that time, the company had substantial earnings relative to its interest obligations, reflecting a conservative financial position with ample coverage.

By May 31, 2022, the interest coverage increased further to approximately 1,169.43, strengthening the perception of a strong capacity to meet interest expenses. The increase indicates improved earnings or a reduction in interest obligations, reinforcing financial stability and low default risk.

However, a notable decline is observed in the subsequent years. By May 31, 2023, the interest coverage ratio plummeted to approximately 0.67. This significant decrease indicates that earnings before interest and taxes (EBIT) are insufficient to cover interest expenses, signaling a potential deterioration in financial health or profitability issues. The ratio below 1 suggests that the company is not generating enough operational profit to comfortably meet its interest obligations.

The downward trend continues into May 31, 2024, with the ratio rising modestly to approximately 0.84. Despite the slight improvement, the ratio remains below 1, indicating ongoing challenges in covering interest costs from operating earnings.

By May 31, 2025, the interest coverage ratio drops to zero, implying that the company either has no earnings to cover interest expenses or has entirely ceased paying interest, perhaps due to insolvency, restructuring, or cessation of interest payments altogether.

Overall, the pattern indicates a substantial decline in Neogen Corporation's ability to service its interest obligations over the analyzed period. The initial high ratios demonstrate a historically strong financial position, but the recent ratios point to significant operational or financial difficulties that compromise the company's interest coverage capacity.