Sonic Automotive Inc (SAH)
Debt-to-equity ratio
Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
---|---|---|---|---|---|---|
Long-term debt | US$ in thousands | 1,511,900 | 1,616,500 | 1,672,200 | 1,510,700 | 651,800 |
Total stockholders’ equity | US$ in thousands | 1,062,300 | 891,900 | 895,200 | 1,076,400 | 814,800 |
Debt-to-equity ratio | 1.42 | 1.81 | 1.87 | 1.40 | 0.80 |
December 31, 2024 calculation
Debt-to-equity ratio = Long-term debt ÷ Total stockholders’ equity
= $1,511,900K ÷ $1,062,300K
= 1.42
The debt-to-equity ratio of Sonic Automotive Inc has shown an upward trend over the past five years, indicating a notable increase in the company's financial leverage. The ratio stood at 0.80 as of December 31, 2020, and has steadily increased to 1.42 as of December 31, 2024. This rise suggests that Sonic Automotive has been relying more on debt financing relative to equity financing to support its operations and growth initiatives.
A debt-to-equity ratio above 1 indicates that the company has more debt than equity in its capital structure. While a higher debt-to-equity ratio can amplify returns on equity when the company is performing well, it also exposes the business to higher financial risk, especially in times of economic uncertainty or rising interest rates. Therefore, investors and creditors may view the increasing trend in Sonic Automotive's debt-to-equity ratio as a signal of potential financial vulnerability and increased leverage.
It would be important for Sonic Automotive Inc to carefully manage its debt levels and monitor its ability to service its debt obligations, as a high debt-to-equity ratio can limit its financial flexibility and potentially impact its creditworthiness in the eyes of lenders and investors.
Peer comparison
Dec 31, 2024