Waters Corporation (WAT)

Solvency ratios provide insight into a company's ability to meet its long-term financial obligations. Looking at the solvency ratios of Waters Corp. over the past eight quarters, we can observe the following trends:

1. Debt-to-assets ratio: This ratio indicates the proportion of total assets financed by debt. Waters Corp.'s debt-to-assets ratio has fluctuated between 0.45 and 0.58 over the past year, with an average of around 0.51. The company's debt level relative to its total assets has remained relatively stable, indicating a moderate level of leverage.

2. Debt-to-capital ratio: This ratio reflects the proportion of total capitalization that is funded by debt. Waters Corp.'s debt-to-capital ratio has ranged from 0.67 to 0.77 in the last eight quarters, averaging approximately 0.73. The company's reliance on debt to fund its operations has shown some variability but has generally stayed within a moderate range.

3. Debt-to-equity ratio: This ratio measures the extent to which a company is reliant on debt financing compared to equity. Waters Corp.'s debt-to-equity ratio has fluctuated significantly from 2.05 to 3.41 over the past year, with an average of around 3.09. The company's increasing trend in this ratio indicates a higher level of financial risk, as a larger portion of the company's financing is coming from debt rather than equity.

4. Financial leverage ratio: This ratio reflects the company's overall debt level in relation to its equity and indicates the degree of financial risk. Waters Corp.'s financial leverage ratio has ranged from 4.02 to 8.11 in the last eight quarters, with an average of approximately 6.66. The company's financial leverage has shown significant variability, suggesting a higher level of financial risk as the ratio increases, indicating potential challenges in meeting debt obligations.

In summary, based on the solvency ratios of Waters Corp., the company has maintained a moderate level of debt relative to its assets and capital, but its increasing debt-to-equity ratio and fluctuating financial leverage ratio indicate a higher level of financial risk and potential challenges in meeting long-term obligations. Management should closely monitor these solvency ratios to ensure the company's financial health and sustainability in the long term.

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Coverage ratios

The interest coverage ratio for Waters Corp. has shown a declining trend over the past quarters, starting at 24.73 in Q1 2022 and consistently decreasing to 9.94 in Q4 2023. This indicates that the company's ability to cover its interest expenses with its earnings has weakened over time. A higher interest coverage ratio is generally preferred as it signifies a company's ability to comfortably meet its interest payments from its operating income.

The reduction in the interest coverage ratio could be a cause for concern, as it may indicate that Waters Corp. is becoming less capable of servicing its debt obligations out of its operational earnings. This trend suggests that the company may be facing challenges in generating sufficient earnings to cover its interest expenses, which could potentially impact its financial stability and creditworthiness.

It would be advisable for stakeholders and investors to closely monitor this trend and assess the company's overall financial health and ability to manage its debt levels effectively. Further analysis and understanding of the underlying factors driving this decline in interest coverage would be crucial in forming a comprehensive view of Waters Corp.'s financial performance and risk profile.