Broadcom Inc. (NASDAQ:AVGO)

The financial data reveals several notable trends in the company's leverage and coverage ratios over the analyzed periods.

Debt to Equity Ratios

The debt to equity ratio increased from 1.32 in 2019 to a peak of 1.74 in 2022, indicating a rising reliance on debt financing relative to equity over this period. However, it then declined significantly to 1.0 by 2024, suggesting a reduction in leverage or an increase in equity. When including operating lease liabilities, the pattern is similar, with a peak near 1.76 in 2022 and decline to 1.02 in 2024.

Debt to Capital Ratios

Debt to capital showed a consistent rise from 0.57 in 2019 to 0.64 in 2022, which implies an increasing portion of the company’s capital structure is comprised of debt. This ratio decreased to 0.5 in 2024, indicating a lower proportion of debt in total capital. The values including operating lease liabilities closely mirror this trend.

Debt to Assets Ratios

The debt to assets ratio followed a similar trajectory, increasing from 0.49 in 2019 to 0.55 in 2020 and remaining fairly stable near 0.54 to 0.55 through 2023 before dropping markedly to around 0.41-0.42 in 2024. This suggests a reduction in the proportion of assets financed through debt in the most recent period.

Financial Leverage

Financial leverage rose gradually from 2.71 in 2019 to 3.23 in 2022, indicating the company was using more debt relative to equity to finance its assets, but then decreased sharply to 2.45 by 2024, reflecting a conservative shift in capital structure or improved equity levels.

Interest and Fixed Charge Coverage Ratios

Interest coverage improved significantly from 2.54 in 2019 to 10.31 in 2023, suggesting much greater earnings relative to interest obligations and therefore improved ability to cover interest costs. This ratio decreased to 3.51 in 2024, indicating reduced but still sufficient coverage. Fixed charge coverage exhibited a similar trend, increasing from 2.27 in 2019 to 9.81 in 2023 and then falling to 3.4 in 2024.

Overall, the data reflects a period of increasing leverage from 2019 through 2022, accompanied by improved capacity to service debt obligations through 2023, followed by a marked reduction in leverage and some decline in coverage ratios in 2024. The recent decline in leverage ratios combined with still moderate interest coverage suggests a strategic emphasis on deleveraging while maintaining adequate earnings to meet fixed financial obligations.

Total Debt

The total debt increased significantly over the analyzed period. Starting at approximately $32.8 billion in late 2019, it rose steadily to around $41.1 billion in 2020. Following a slight decrease and relative stabilization around $39.5 billion during 2021 to 2023, there is a marked increase in 2024, reaching approximately $67.6 billion. This sharp rise in the latest year indicates a considerable increase in leverage or new financing activities.

Stockholders’ Equity

Stockholders’ equity shows a fluctuating pattern with modest declines and recoveries over the years. Beginning at approximately $24.9 billion in 2019, it slightly decreased to $23.9 billion in 2020, rebounded to nearly $25 billion in 2021, and then declined again to $22.7 billion in 2022. Equity recovered somewhat to $24 billion in 2023, followed by a significant jump to about $67.7 billion in 2024. This last increase aligns closely with the surge in total debt, suggesting possible equity issuance or revaluation.

Debt to Equity Ratio

The debt to equity ratio fluctuated between approximately 1.3 and 1.7 from 2019 through 2023, indicating a fairly consistent leverage level with some variation. Notably, the ratio peaked near 1.74 in 2022, suggesting higher leverage relative to equity at that point. In 2024, the ratio notably decreased to 1.0 despite the large increase in both debt and equity, indicating that the growth in equity proportionally outpaced the rise in debt or that the balance between debt and equity was repositioned to a more conservative leverage stance.

Overall Insights

The company’s financial leverage exhibited an upward trajectory with sizable debt accumulation through 2020, followed by a stabilization period. The sudden and substantial increases in both total debt and equity in 2024 imply strategic financial restructuring or capital infusion. The decline in the debt to equity ratio to a balanced level of 1.0 in 2024 suggests an improved leverage profile, potentially reducing financial risk despite the higher absolute debt level. These movements likely reflect active capital management, possibly in response to market conditions or corporate growth initiatives.

Total Debt (including operating lease liability)

The total debt showed an increasing trend from November 2019 to November 2020, rising from $32,798 million to $41,689 million. This was followed by a slight decrease over the next three years, with amounts recorded at $40,273 million, $39,978 million, and $39,648 million for 2021, 2022, and 2023 respectively. However, in November 2024, there was a significant increase to $68,916 million, marking a considerable rise compared to previous years.

Stockholders’ Equity

Stockholders’ equity had an overall stable trajectory between 2019 and 2023, fluctuating mildly between approximately $22,709 million and $24,962 million. Specifically, it started at $24,941 million in 2019, experienced minor declines and recoveries, with the lowest point observed in 2022 at $22,709 million. A sharp increase occurred in 2024, reaching $67,678 million, which is nearly three times the equity levels of prior years.

Debt to Equity Ratio (including operating lease liability)

The debt to equity ratio increased from 1.32 in 2019 to a peak of 1.76 in 2022, indicating a rising leverage position over the years 2019 to 2022. Following that, it slightly declined to 1.65 in 2023. By 2024, the ratio decreased substantially to 1.02, reflecting a significant change in the relationship between debt and equity. This shift suggests that the company's equity has grown disproportionately relative to debt in the most recent year.

Summary of Financial Leverage Trends

During the period from 2019 to 2023, there was a trend of increased leverage, with rising debt levels outpacing equity growth, resulting in elevated debt to equity ratios. This indicates a strategy of higher borrowing, albeit with a recent stabilization. The significant surge in both total debt and stockholders' equity in 2024, coupled with a reduction in the debt to equity ratio, suggests a structural change in capital composition. The simultaneous increase in equity and debt implies potential new equity financing or revaluation, altering the company's leverage profile to a more balanced state by the end of the observed period.

Total Debt

The total debt has shown a fluctuating but generally increasing trend over the years. Starting at 32,798 million US dollars in 2019, it rose significantly to 41,062 million in 2020. This was followed by a slight decline in 2021 and 2022, stabilizing around the 39,500 million mark. However, in 2024 there is a noteworthy jump to 67,566 million, indicating a substantial increase in borrowing or liabilities.

Total Capital

Total capital has displayed a steady increase until 2023, growing from 57,739 million in 2019 to 63,217 million in 2023. In 2024, there is a pronounced increase to 135,244 million, more than doubling the prior year's figure. This indicates significant capital expansion, potentially through equity, debt, or a combination of sources.

Debt to Capital Ratio

The debt to capital ratio has fluctuated between 0.57 and 0.64 from 2019 to 2023, indicating a relatively stable debt structure as a proportion of total capital. Despite variations in absolute values of debt and capital, the ratio stayed consistently around 60%. However, in 2024, the ratio declined to 0.5, suggesting a lower proportion of debt in the capital structure despite the absolute increase in debt, likely due to the much larger increase in total capital.

Overall, the data reflect a pattern of increasing capital with a strategic adjustment in leverage. The marked increase in total capital in the latest year considerably outpaces the rise in debt, leading to a more conservative debt-to-capital ratio. This shift may indicate a move towards strengthening the balance sheet or financing growth through equity or other non-debt means while maintaining a manageable level of leverage.

Debt Levels

The total debt, inclusive of operating lease liabilities, exhibited a general upward trend over the period analyzed. Starting at $32,798 million in 2019, debt increased notably in 2020 to $41,689 million, then slightly decreased and stabilized around the $39,000 million range through 2022 and 2023. However, a significant rise is observed in 2024, where debt surged to $68,916 million, representing the highest level within this timeframe.

Total Capital

Total capital, also inclusive of operating lease liabilities, increased gradually from $57,739 million in 2019 to approximately $65,563 million in 2020, followed by a marginal decline to $62,687 - $63,636 million in the subsequent years through 2023. In 2024, total capital sharply increased to $136,594 million, more than doubling from the prior year, which corresponds with the significant increase in total debt.

Debt to Capital Ratio

The debt to capital ratio fluctuated within a relatively narrow band over most of the period, moving between 0.57 and 0.64 from 2019 to 2023. The highest ratios occurred in 2020 and 2022 at 0.64. In 2024, the ratio decreased substantially to 0.50 despite the sharp increase in both debt and total capital, indicating that capital grew proportionately more than debt. This suggests an expansion in capital structure that includes a significant increase in financing beyond just debt.

Summary Insight

From 2019 to 2023, debt and total capital showed moderate variability with debt generally comprising roughly 60% or more of total capital. The sudden and marked increases in both debt and total capital in 2024, combined with a reduced debt to capital ratio, imply a strategic shift in the company’s financial structure, possibly reflecting new financing activities or capital infusion that expands the asset or funding base at a faster rate than debt accumulation.

Total Debt

The total debt demonstrated a significant upward trend over the observed periods, starting at $32,798 million in 2019 and increasing moderately through 2023, with values fluctuating around the $39,000 million mark. A substantial spike is evident in 2024, where total debt reaches $67,566 million, indicating a pronounced increase in the company's leverage or borrowing activities in the latest year.

Total Assets

Total assets also increased over the time frame but experienced a different trajectory. From $67,493 million in 2019, assets grew consistently until 2021, then saw a modest decline in 2022 and 2023 to levels just below $73,000 million. A marked surge occurred in 2024, where total assets more than doubled compared to the previous years, reaching $165,645 million. This significant increase could reflect major acquisitions, asset revaluation, or other strategic investments.

Debt to Assets Ratio

The debt to assets ratio remained relatively stable between 0.49 and 0.54 from 2019 through 2023, suggesting that the company maintained a consistent level of financial leverage during these years despite fluctuations in absolute debt and asset amounts. In 2024, however, the ratio decreased markedly to 0.41, reflecting an improvement in the company's capital structure. Despite the large increase in total debt, the even greater increase in assets resulted in a lower proportion of debt relative to assets, indicating potentially enhanced financial stability or asset base expansion exceeding debt growth.

Summary

Overall, the data reveals a company undergoing substantial change in its financial structure in the most recent year. Both total assets and total debt have increased significantly in 2024 compared to prior years. However, the more pronounced growth in assets relative to debt has improved the debt to assets ratio, suggesting a potentially lower risk profile or a strategic shift to expand asset holdings possibly supported by debt financing. The prior years show a relatively steady relationship between debt and assets without large volatility in leverage.

Total debt (including operating lease liability)

The total debt exhibited a general increasing trend over the analyzed period, rising from 32,798 million USD in late 2019 to 68,916 million USD by late 2024. Notable fluctuations occurred in the interim years, with the debt peaking at 41,689 million USD in 2020, followed by a slight reduction and stabilization around 39,600 million USD from 2021 through 2023 before sharply increasing again in 2024.

Total assets

Total assets grew steadily from 67,493 million USD in 2019 to 75,933 million USD in 2020 but then showed a slight decline and relative stability through 2023, reaching 72,861 million USD. A significant upward jump is observed in 2024, with total assets more than doubling to 165,645 million USD, indicating a substantial asset base expansion during that year.

Debt to assets (including operating lease liability)

The debt-to-assets ratio started at 0.49 in 2019 and increased to a maximum of 0.55 in 2020 and 2022, indicating that debt represented a higher proportion of assets during these years. The ratio remained relatively stable around 0.53-0.55 during the middle years but decreased notably to 0.42 in 2024, despite the increase in total debt. This decline is primarily attributable to the considerable growth in total assets during the same period, thereby reducing leverage on an assets basis.

Total assets

Over the observed periods, total assets exhibited a generally stable trend from 2019 to 2023, with values oscillating around the 67,000 to 75,000 million US dollars range. There was a slight decline between 2021 and 2023, from 75,570 to 72,861 million US dollars, indicating a moderate reduction in asset base. Notably, in the latest period, total assets more than doubled to 165,645 million US dollars, signifying a significant increase in the company’s asset holdings.

Stockholders’ equity

Stockholders’ equity fluctuated within a narrower band compared to total assets, beginning at 24,941 million US dollars in 2019, dipping to a low of 22,709 million in 2022, and then recovering slightly to 23,988 million by 2023. The most recent period shows a sharp rise to 67,678 million US dollars, closely mirroring the jump in total assets. This considerable growth in equity suggests a major capital infusion or accumulated earnings boost, reinforcing the company’s net asset position.

Financial leverage

Financial leverage ratios fluctuated between 2.45 and 3.23 over the reviewed years, reflecting varying degrees of reliance on debt financing relative to equity. The ratio peaked at 3.23 in 2022, indicating higher leverage and potentially increased financial risk at that time. In contrast, the latest figure dropped to 2.45, the lowest in the dataset, suggesting a reduction in leverage and a stronger equity position relative to total assets. This shift could be related to the marked increase in equity observed in the most recent year.

Earnings before interest and tax (EBIT)

The EBIT demonstrated a significant upward trend from 2019 to 2023, increasing from 3,670 million US dollars in 2019 to a peak of 16,719 million US dollars in 2023. This reflects substantial growth in operational profitability over this five-year span. However, in 2024, EBIT decreased to 13,869 million US dollars, indicating a contraction in operating earnings relative to the previous year.

Interest expense

Interest expenses rose moderately from 1,444 million US dollars in 2019 to 1,885 million US dollars in 2021, followed by a slight decline to 1,622 million US dollars in 2023. Notably, there was a sharp increase in 2024, with interest expense reaching 3,953 million US dollars, more than doubling the prior year's figure. This spike suggests either increased borrowing costs or higher levels of debt.

Interest coverage

The interest coverage ratio, which measures the ability to meet interest obligations from EBIT, showed improvement from 2.54 in 2019 to a high of 10.31 in 2023, indicating a strong capacity to cover interest expenses during this period. However, in 2024, the ratio declined significantly to 3.51, reflecting a reduced margin of safety for interest payments, likely influenced by the lowered EBIT and heightened interest expenses.

The data reveals significant movements in earnings before fixed charges and tax, fixed charges, and the fixed charge coverage ratio over the six-year period ending in 2024.

Earnings before fixed charges and tax

There is a clear upward trend from 2019 through 2023, beginning at 3,914 million US dollars and rising steadily each year to reach a peak of 16,810 million US dollars in 2023. However, in 2024, earnings declined notably to 14,056 million US dollars, representing a decrease from the previous year but still substantially higher than the earlier years.

Fixed charges

The fixed charges have fluctuated over the period. Starting at 1,725 million US dollars in 2019, they increased to 2,259 million in 2020 and slightly higher to 2,365 million in 2021. In 2022, fixed charges decreased marginally to 2,179 million and then dropped further to 1,713 million in 2023. However, 2024 saw a sharp increase to 4,140 million, the highest in the dataset.

Fixed charge coverage ratio

This ratio, which measures the ability to cover fixed charges with earnings, shows variability corresponding to the changes in earnings and fixed charges. It trended downward from 2.27 in 2019 to a low of 1.92 in 2020, before rising sharply to 3.7 in 2021 and then increasing significantly to 6.55 in 2022 and peaking at 9.81 in 2023. The ratio declined substantially in 2024 to 3.4, reflecting the combined effect of decreased earnings and a sharp increase in fixed charges in that year.

Overall, the data indicates strong growth in earnings through 2023, accompanied by relatively stable or decreasing fixed charges, which improved the coverage ratio significantly. The year 2024 presents a reversed scenario with earnings falling and fixed charges more than doubling, causing the coverage ratio to decline sharply. This suggests a potential reduction in financial flexibility or increased financial risk in the most recent period.