STERIS plc (STE)

Solvency ratios are important indicators of a company's ability to meet its long-term obligations. Let's analyze the solvency ratios of STERIS plc based on the provided data from the table:

1. Debt-to-assets ratio:
- The debt-to-assets ratio measures the proportion of a company's assets financed by debt. STERIS plc has consistently maintained a relatively low debt-to-assets ratio over the past five years, ranging from 0.21 to 0.28. This indicates that a significant portion of the company's assets are financed through equity rather than debt, which can be viewed positively from a solvency perspective.

2. Debt-to-capital ratio:
- The debt-to-capital ratio compares a company's total debt to its total capital (debt + equity). STERIS plc's debt-to-capital ratio has also remained relatively stable over the years, ranging from 0.25 to 0.33. This suggests that the company's capital structure includes a moderate level of debt financing, which is important for maintaining a healthy balance between debt and equity.

3. Debt-to-equity ratio:
- The debt-to-equity ratio indicates the relative proportion of debt and equity used to finance a company's assets. STERIS plc has exhibited a consistent downward trend in its debt-to-equity ratio, from 0.34 in 2020 to 0.50 in 2024. This indicates that the company has been reducing its reliance on debt financing in favor of equity, which can enhance its financial stability and solvency position.

4. Financial leverage ratio:
- The financial leverage ratio measures the extent to which a company is using debt to finance its assets. STERIS plc's financial leverage ratio has increased gradually over the years, from 1.60 in 2020 to 1.76 in 2024. This suggests that the company's reliance on debt has slightly increased, which could potentially lead to higher financial risk but could also indicate strategic expansion or investment decisions.

In summary, STERIS plc's solvency ratios reflect a prudent approach to managing its long-term obligations, with a moderate level of debt financing and a gradual reduction in debt-to-equity ratios. The company's low debt-to-assets ratio indicates a conservative balance between debt and equity, while the increasing financial leverage ratio suggests a slightly higher reliance on debt for financing. Overall, the solvency ratios suggest that STERIS plc has maintained a stable and relatively healthy financial position over the past five years.

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Coverage ratios

The interest coverage ratio measures a company's ability to meet its interest payment obligations with its operating income. A higher interest coverage ratio indicates a stronger ability to cover interest expenses with operating income.

Looking at the historical trend of STERIS plc's interest coverage ratio:
- In the most recent period as of March 31, 2024, the interest coverage ratio stands at 4.66, showing an improvement compared to the previous year.
- The interest coverage ratio saw a significant decline in the year ended March 31, 2023, dropping to 2.47.
- Prior to that, in March 31, 2022, the ratio improved to 4.52, indicating better coverage of interest expenses.
- The ratios for March 31, 2021, and March 31, 2020, were notably higher at 14.93 and 13.38, respectively, reflecting robust ability to cover interest payments with operating income.

Overall, STERIS plc's interest coverage ratio has fluctuated over the past five years, with a recent improvement in the latest period. Despite the fluctuations, the company has generally maintained a healthy interest coverage ratio, indicating a solid ability to meet its interest payment obligations. Continued monitoring of this ratio will be important to assess the company's financial health and debt repayment ability.