OSI Systems Inc (OSIS)

The solvency ratios of OSI Systems Inc. from June 30, 2021, to June 30, 2025, indicate a notably conservative capital structure with regard to debt management. The debt-to-assets ratio, debt-to-capital ratio, and debt-to-equity ratio consistently remain at zero across all reported periods, suggesting that the company has maintained an entirely equity-financed structure without any reliance on debt funding during this timeframe. Such a pattern underscores a low financial leverage concerning these specific ratios, highlighting the company's strong equity position and minimal or no debt obligations.

In contrast, the financial leverage ratio, which measures the company's asset base relative to its shareholder equity, persists within a moderate range, fluctuating from 2.14 to 2.36 over the five-year period. This ratio indicates that the company's total assets are approximately twice its equity, reflecting a consistent degree of financial leverage. The stability of the financial leverage ratio, despite the absence of debt, suggests that the ratio may incorporate other factors beyond traditional debt measurements or may be influenced by differences in asset and equity calculations.

Overall, OSI Systems Inc. exhibits a highly conservative solvency profile characterized by the absence of debt, combined with a stable level of asset leverage. This approach minimizes financial risk associated with debt servicing but also implies that the company relies entirely on equity capital, which may influence its capacity for growth and flexibility in financial management.

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Coverage ratios

The interest coverage ratio of OSI Systems Inc over the specified periods indicates significant fluctuations, reflecting variations in the company's ability to meet interest obligations from its earnings before interest and taxes (EBIT). As of June 30, 2021, the interest coverage ratio stood at 6.90, signifying that the company's EBIT was approximately 6.9 times greater than its interest expenses, which can be considered a solid buffer that suggests a relatively comfortable capacity to service interest obligations during that period.

The ratio improved notably in the subsequent year, reaching 14.43 as of June 30, 2022. This sharp increase indicates a substantial enhancement in the company's EBIT relative to its interest expenses, implying stronger profitability or perhaps reduced interest obligations, thereby providing an even larger margin of safety for debt servicing.

However, in the following year, June 30, 2023, a decline to 6.75 was observed, bringing the interest coverage ratio close to its 2021 level. Despite this decrease, the ratio remains well above the generally considered benchmark of 3, suggesting that the company was still comfortably able to meet its interest expenses, albeit with a reduced margin compared to the previous year.

Similarly, as of June 30, 2024, the ratio remained steady at 6.77, indicating stability in the company's earnings relative to its interest obligations during that year. This consistency suggests effective management of the company's interest expenses and earnings generation capacity.

By June 30, 2025, the interest coverage ratio drops to 0.00. This indicates that the company either experienced a significant decline in EBIT to the extent that it was insufficient to cover interest expenses, or that interest expenses may have been eliminated or became negligible, potentially due to extraordinary circumstances such as debt repayment, restructuring, or reporting anomalies. Such a zero ratio poses a serious concern for financial stability and debt servicing ability, highlighting a potential risk area that warrants further investigation.

Overall, the company's interest coverage ratio has exhibited considerable variability over the analyzed period, with periods of strong coverage followed by a concerning decline toward zero. This trend underscores the importance of examining underlying earnings performance, interest expense changes, and any extraordinary items to accurately assess the company's capacity to service its debt obligations safely over time.