Quanex Building Products (NX)
Financial leverage ratio
| Oct 31, 2023 | Oct 31, 2022 | Oct 31, 2021 | Oct 31, 2020 | Oct 31, 2019 | ||
|---|---|---|---|---|---|---|
| Total assets | US$ in thousands | 831,143 | 724,617 | 717,323 | 691,585 | 645,110 |
| Total stockholders’ equity | US$ in thousands | 545,554 | 464,835 | 419,782 | 355,759 | 330,187 |
| Financial leverage ratio | 1.52 | 1.56 | 1.71 | 1.94 | 1.95 |
October 31, 2023 calculation
Financial leverage ratio = Total assets ÷ Total stockholders’ equity
= $831,143K ÷ $545,554K
= 1.52
The financial leverage ratio, also known as the debt-to-equity ratio, measures the extent to which a company is using debt to finance its assets relative to its equity. A higher financial leverage ratio indicates greater reliance on debt financing, which can increase financial risk but also potentially amplify returns for shareholders.
Looking at the financial leverage ratio for Quanex Building Products Corp over the past five years, we observe a declining trend from 1.95 in 2019 to 1.52 in 2023. This trend suggests that the company has been reducing its reliance on debt to finance its operations and investments in recent years.
A decreasing financial leverage ratio can be an indication of improved financial stability and reduced risk, as it signifies a lower proportion of debt in the company's capital structure relative to equity. This trend may signal that the company has been focusing on strengthening its financial position and reducing its debt burden.
It's essential to note that while a declining financial leverage ratio generally indicates a healthier balance sheet, it's essential to consider the overall economic environment and the company's growth prospects. A company that expands rapidly may need to take on more debt to fund its growth, while a mature company may seek to reduce its debt levels.
In conclusion, the decreasing trend in Quanex Building Products Corp's financial leverage ratio from 2019 to 2023 suggests a shift towards a lower reliance on debt financing, potentially contributing to improved financial stability and reduced risk. However, further analysis, including a review of the company's overall financial health and growth strategy, is necessary to fully evaluate the implications of this trend.
Peer comparison
Oct 31, 2023