NewJersey Resources Corporation (NJR)

Debt-to-equity ratio

		Sep 30, 2023	Sep 30, 2022	Sep 30, 2021	Sep 30, 2020	Sep 30, 2019
Long-term debt	US$ in thousands	2,587,840	2,362,840	2,102,840	2,102,840	1,442,840
Total stockholders’ equity	US$ in thousands	1,990,740	1,817,210	1,630,860	1,643,900	1,381,830
Debt-to-equity ratio		1.30	1.30	1.29	1.28	1.04

September 30, 2023 calculation

Debt-to-equity ratio = Long-term debt ÷ Total stockholders’ equity
= $2,587,840K ÷ $1,990,740K
= 1.30

The debt-to-equity ratio is a critical financial metric that indicates the proportion of a company's financing that is provided by debt compared to equity. A higher debt-to-equity ratio suggests that the company is being financed more by debt, which can indicate a higher financial risk.

Analyzing New Jersey Resources Corporation's debt-to-equity ratio over the past five years, we observe a trend of fluctuation. In 2019, the ratio was relatively low at 1.02, indicating a conservative capital structure with a higher proportion of equity financing compared to debt. However, in the subsequent years, the ratio increased steadily, reaching 1.60 in 2021, signifying an increase in leverage and a shift towards higher debt financing. The highest recorded ratio was in 2022 at 1.64, indicating a significant increase in debt relative to equity.

The latest available data as of September 30, 2023, shows a debt-to-equity ratio of 1.58. This implies that for every dollar of equity, the company has $1.58 in debt. This suggests a continued reliance on debt for financing, although the ratio has decreased slightly from the previous year.

The increasing trend in the debt-to-equity ratio raises concerns about the company's debt load and financial risk. While debt can be an important source of capital for growth and investment, a high ratio may indicate potential challenges in servicing debt obligations, especially if the company's earnings or cash flows are not growing at a sufficient rate to cover these obligations.

It is important for stakeholders to carefully monitor this ratio, as a higher debt-to-equity ratio can impact the company's creditworthiness, cost of capital, and overall financial stability. Management should consider the implications of this trend and develop strategies to maintain a prudent balance between debt and equity financing, ensuring sustainable growth and financial health. Additionally, potential investors and lenders may scrutinize this ratio when making investment or lending decisions, emphasizing the importance of effectively managing the company's capital structure.