Essential Utilities Inc (WTRG)
Solvency ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Debt-to-assets ratio | 0.41 | 0.41 | 0.39 | 0.40 | 0.31 |
| Debt-to-capital ratio | 0.54 | 0.54 | 0.53 | 0.54 | 0.43 |
| Debt-to-equity ratio | 1.16 | 1.18 | 1.11 | 1.18 | 0.76 |
| Financial leverage ratio | 2.86 | 2.92 | 2.83 | 2.93 | 2.41 |
Essential Utilities Inc's solvency ratios provide insights into the company's ability to meet its financial obligations and the extent to which it relies on debt to finance its operations.
1. Debt-to-assets ratio: This ratio indicates the proportion of the company's assets financed by debt. Essential Utilities Inc's debt-to-assets ratio has been relatively stable over the past five years, ranging from 0.33 to 0.43. The decreasing trend from 2019 to 2021 followed by a slight increase in 2023 suggests a moderate reliance on debt to fund its assets.
2. Debt-to-capital ratio: This ratio compares the company's total debt to its total capital (debt and equity). Essential Utilities Inc's debt-to-capital ratio has also been consistent over the period, ranging from 0.44 to 0.56. The company maintains a stable level of debt in relation to its total capital, indicating a balanced capital structure.
3. Debt-to-equity ratio: The debt-to-equity ratio measures the company's leverage and financial risk by comparing its total debt to shareholders' equity. Essential Utilities Inc's debt-to-equity ratio has increased gradually over the years, indicating a higher reliance on debt financing relative to shareholders' equity. The ratio of 1.20 in 2023 suggests that the company has $1.20 in debt for every $1 of equity.
4. Financial leverage ratio: This ratio reflects the company's overall financial risk by comparing its total assets to shareholders' equity. Essential Utilities Inc's financial leverage ratio has also shown a consistent pattern, with values ranging from 2.41 to 2.93. The ratio has increased over the years, indicating that the company has been utilizing more debt to finance its operations.
Overall, Essential Utilities Inc's solvency ratios suggest a moderate reliance on debt to support its operations and growth. The stable trends in these ratios indicate a balanced approach to capital structure management, although the gradual increase in leverage ratios over time highlights a higher level of financial risk that investors and creditors should monitor.
Coverage ratios
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | |
|---|---|---|---|---|---|
| Interest coverage | 2.52 | 2.89 | 3.03 | 2.41 | 2.69 |
The interest coverage ratio for Essential Utilities Inc has shown fluctuations over the past five years. In 2023, the interest coverage ratio was 2.47, slightly lower compared to the previous two years, indicating that the company's ability to cover interest expenses with its earnings declined. However, the ratio was still above 1, suggesting that the company generated enough operating income to cover its interest obligations.
The trend in interest coverage from 2020 to 2022 was relatively stable, with ratios ranging from 2.36 to 2.94. This indicates a consistent ability to meet interest payments during this period.
In 2019, Essential Utilities Inc had a higher interest coverage ratio of 3.42, indicating a more comfortable position in terms of covering its interest expenses with its earnings compared to the subsequent years.
Overall, it is important for stakeholders to monitor the interest coverage ratio closely to ensure that Essential Utilities Inc can continue to meet its interest obligations and manage its debt effectively.