SolarEdge Technologies Inc (SEDG)
Solvency ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.13 | 0.14 | 0.15 | 0.43 | 0.47 |
| Debt-to-capital ratio | 0.33 | 0.21 | 0.22 | 0.49 | 0.51 |
| Debt-to-equity ratio | 0.50 | 0.26 | 0.29 | 0.95 | 1.06 |
| Financial leverage ratio | 4.00 | 1.90 | 1.96 | 2.21 | 2.24 |
The solvency ratios of SolarEdge Technologies Inc show a consistent improvement over the years, indicating a strengthened financial position.
1. Debt-to-assets ratio: This ratio measures the proportion of a company's assets financed by debt. SolarEdge's debt-to-assets ratio has decreased from 0.47 in 2020 to 0.13 in 2024. This downward trend suggests that the company is relying less on debt to fund its operations and investments, which is a positive sign for solvency.
2. Debt-to-capital ratio: This ratio indicates the percentage of a company's capital that is financed by debt. SolarEdge's debt-to-capital ratio has also shown a declining trend, decreasing from 0.51 in 2020 to 0.33 in 2024. This decrease implies that the company has been reducing its reliance on debt to fund its operations and capital expenditures.
3. Debt-to-equity ratio: The debt-to-equity ratio measures the proportion of a company's financing that comes from debt compared to equity. SolarEdge's debt-to-equity ratio has declined from 1.06 in 2020 to 0.50 in 2024. This improvement indicates that the company has been progressively reducing its debt levels in relation to its equity, which can enhance financial stability.
4. Financial leverage ratio: The financial leverage ratio shows the extent to which a company relies on debt to finance its operations. SolarEdge's financial leverage ratio has decreased from 2.24 in 2020 to 4.00 in 2024. This increase in the financial leverage ratio suggests that the company has taken on more debt in recent years, which could potentially increase financial risk.
Overall, the decreasing trend in debt-related ratios such as debt-to-assets, debt-to-capital, and debt-to-equity ratios, coupled with the increase in the financial leverage ratio, indicates that SolarEdge Technologies Inc has become less reliant on debt financing while potentially taking on more financial leverage. This improved solvency position bodes well for the company's financial health and operational stability.
Coverage ratios
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|
| Interest coverage | -1,001.06 | 64.63 | 108.58 | 30.36 | 31.71 |
The interest coverage ratio is a key financial metric that indicates a company's ability to cover its interest expenses with its operating income.
In the case of SolarEdge Technologies Inc, the interest coverage ratio has shown varying trends over the past five years.
As of December 31, 2020, the company had an interest coverage ratio of 31.71, indicating that it was generating sufficient operating income to cover its interest expenses nearly 32 times over.
By the end of 2021, the interest coverage ratio had slightly decreased to 30.36, still reflecting a strong ability to meet interest obligations.
In the following year, as of December 31, 2022, the ratio significantly improved to 108.58, signaling a substantial increase in the company's ability to cover its interest expenses with operating income.
However, in 2023, the interest coverage ratio slightly declined to 64.63, although it remained at a healthy level, indicating SolarEdge's continued ability to comfortably meet its interest payments.
Unexpectedly, by the end of 2024, the interest coverage ratio plummeted to -1,001.06, which may suggest a significant decline in operating income relative to interest expenses. This negative ratio could be a cause for concern as it indicates that the company's operating income may not be sufficient to cover its interest obligations.
Overall, while SolarEdge Technologies Inc has historically demonstrated strong interest coverage ratios, the drastic negative ratio in 2024 warrants further investigation to understand the potential reasons behind this significant deterioration in the company's ability to cover its interest expenses.