Seagate Technology PLC (STX)

The solvency ratios of Seagate Technology PLC indicate the company's ability to meet its long-term financial obligations and manage its debt levels.

The debt-to-assets ratio, which measures the proportion of the company's assets financed by debt, has been fluctuating over the past five years but has generally been in the range of 0.47 to 0.71. This suggests that Seagate relies moderately on debt to finance its assets, with the ratio trending upwards overall.

The debt-to-capital ratio, reflecting the proportion of the company's capitalization that is in the form of debt, has also shown an upward trend over the years, with values increasing from 0.70 in 2020 to 1.40 in 2024. This indicates that Seagate's reliance on debt as a source of capital has been increasing, which may raise concerns about the company's financial risk.

The debt-to-equity ratio, which shows the degree of financial leverage employed by the company, has witnessed significant fluctuations. In 2021, the ratio was particularly high at 46.44, suggesting heavy reliance on debt financing. Subsequently, the ratio decreased to 7.76 in 2022 and further to 2.33 in 2023, indicating a reduction in financial leverage over time.

The financial leverage ratio, which also reflects the extent of financial risk, has shown a similar pattern as the debt-to-equity ratio. The ratio was highest in 2022 at 82.06, signaling significant financial leverage, but has since decreased to 13.75 in 2023 and 5.00 in 2024, indicating a reduction in financial risk.

Overall, the solvency ratios of Seagate Technology PLC demonstrate a mix of moderate reliance on debt financing, increasing debt levels in recent years, and a trend towards decreasing financial leverage and risk. It is important for stakeholders to monitor these ratios closely to assess the company's financial health and ability to meet its long-term obligations.

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Coverage ratios

Seagate Technology PLC's interest coverage ratio has fluctuated over the past five years. As of June 30, 2024, the interest coverage ratio stands at 2.34, indicating that the company generated operating income 2.34 times greater than its interest expenses for the period. This reflects a notable improvement compared to the negative interest coverage ratio of -0.58 in the previous year, which suggests that the company struggled to cover its interest obligations with its operating income.

In the preceding years, Seagate's interest coverage ratio was relatively strong, with ratios of 7.74 in 2022, 7.13 in 2021, and 6.13 in 2020, signifying the company's solid ability to meet its interest payments comfortably from its operating profits. The significant drop in 2023's interest coverage highlights a potential concern regarding the company's ability to service its debt from its earnings.

Overall, while Seagate's interest coverage ratio has shown variability, the recent improvement in 2024 compared to the previous year is a positive sign. However, investors and creditors should continue to monitor this ratio to ensure the company can effectively manage its interest obligations in the future.