Micron Technology Inc. (NASDAQ:MU)

The analysis of the financial leverage and coverage ratios over the observed periods reveals notable trends in the company's financial stability and risk profile.

Debt Ratios

The debt to equity ratio remained relatively stable from 2019 through 2022, ranging between 0.14 and 0.17, indicating consistent leverage levels during these years. However, in 2023 and 2024, this ratio more than doubled to approximately 0.3, suggesting an increased reliance on debt financing relative to equity. A similar pattern is observed when including operating lease liabilities, where the ratio increased from around 0.15 in 2022 to just above 0.3 in the later years.

The debt to capital ratio followed a comparable trend, holding steady at approximately 0.12 to 0.16 from 2019 to 2022, then rising sharply to about 0.23–0.24 in 2023 and 2024. Including operating lease liabilities, the ratio shows the same notable increase in recent years.

Debt to assets ratios also indicate a stable position from 2019 to 2022, around 0.10 to 0.13, but rose markedly to 0.19–0.22 in 2023 and 2024. This pattern highlights a growing proportion of debt within the company’s asset base during the latest periods, signifying increased financial risk.

Overall, these ratios demonstrate a pronounced increase in leverage beginning in 2023, after a period of stability. This could indicate strategic shifts toward greater borrowing or alterations in capital structure.

Financial Leverage

Financial leverage ratios were relatively stable from 2019 through 2022, ranging from 1.33 to 1.38, but increased to 1.46 in 2023 and further to 1.54 in 2024. This upward movement aligns with the increased debt ratios and reinforces the observation of a leveraging trend over recent years.

Interest and Fixed Charge Coverage

Interest coverage ratio exhibited considerable volatility. It declined sharply from 56.09 in 2019 to 16.41 in 2020, improved to 35.18 in 2021, and rose further to 51.66 in 2022. However, in 2023, coverage turned negative at -13.58, indicating the company was not generating sufficient earnings to cover interest expenses, which is a sign of financial distress or exceptional circumstances. In 2024, there was a partial recovery to a positive but low level of 3.19.

Fixed charge coverage exhibited a similar pattern: a decline from 32.9 in 2019 to 11.1 in 2020, an increase to 22.49 in 2021 and 31.49 in 2022, followed by a significant drop to -9.77 in 2023 and a modest recovery to 2.75 in 2024. This ratio also reflects stress in the ability to cover fixed financial obligations during 2023 and some improvement thereafter.

Summary

The financial data reveal that from 2019 through 2022, the company maintained relatively stable leverage and strong coverage ratios, indicating robust financial health and effective interest coverage. However, beginning in 2023, there is an evident increase in debt levels and financial leverage, accompanied by deteriorating coverage ratios that turned negative, suggesting challenges in meeting interest and fixed obligations during this period. The partial recovery in 2024 points to some improvement, but coverage ratios remain low. The increased leverage combined with weakened coverage may warrant close monitoring of the company’s financial risk and operational performance going forward.

Total Debt

The total debt exhibits a general upward trend over the analyzed periods. Starting from 5,851 million USD in August 2019, it gradually increased to 6,906 million USD by September 2022. A significant jump is observed between September 2022 and August 2023, where the total debt nearly doubled to 13,330 million USD, maintaining a similar level at 13,397 million USD in August 2024. This sharp increase suggests a considerable rise in borrowing or financial obligations in the most recent years.

Total Shareholders’ Equity

The shareholders’ equity shows steady growth from 35,881 million USD in August 2019 to a peak of 49,907 million USD in September 2022. However, after this peak, there is a decline to 44,120 million USD in August 2023, followed by a slight increase to 45,131 million USD in August 2024. This pattern indicates some equity volatility or possible reductions in retained earnings or other equity components after 2022.

Debt to Equity Ratio

The debt to equity ratio remains relatively stable from 2019 through 2022, fluctuating slightly between 0.14 and 0.17, indicating a conservative leverage approach. From 2022 to 2023, this ratio sharply rises from 0.14 to 0.30 and stays at this elevated level in 2024, reflecting the substantial increase in debt relative to equity. The doubling of this ratio suggests a shift toward higher financial leverage, potentially increasing financial risk.

Total Debt (including operating lease liability)

The total debt exhibited a gradual increase from 2019 through 2022, moving from 5,851 million USD to 7,576 million USD. A substantial rise occurred between 2022 and 2023, with debt nearly doubling to 13,999 million USD, followed by a slight increase to 14,078 million USD in 2024. This indicates a considerable escalation in the company's leverage in the most recent years.

Total Micron Shareholders’ Equity

Shareholders' equity showed a generally upward trajectory over the six-year period. It increased steadily from 35,881 million USD in 2019 to 49,907 million USD in 2022. However, in 2023, there was a noticeable decline to 44,120 million USD, followed by a marginal increase to 45,131 million USD in 2024. This suggests some volatility or adjustments in equity during the later period.

Debt to Equity Ratio (including operating lease liability)

The debt-to-equity ratio remained relatively stable between 2019 and 2022, fluctuating narrowly between 0.15 and 0.19. In 2023, the ratio sharply rose to 0.32, corresponding with the substantial increase in total debt and the concurrent decrease in shareholders’ equity. It slightly decreased to 0.31 in 2024 but remained significantly elevated compared to earlier years, indicating an increase in financial leverage and potential risk exposure.

Total Debt

The total debt of the company shows a steady increase from 2019 to 2022, rising from 5,851 million USD to 6,906 million USD. However, there is a significant jump observed in the following year, 2023, where total debt nearly doubles to 13,330 million USD and remains relatively stable in 2024 at 13,397 million USD.

Total Capital

Total capital demonstrates a consistent upward trend over the six-year period, growing from 41,732 million USD in 2019 to 58,528 million USD in 2024. The growth, while steady, shows a slight deceleration in recent years, particularly between 2022 and 2024.

Debt to Capital Ratio

The debt to capital ratio remains relatively stable and low from 2019 through 2022, ranging from 0.12 to 0.15. In 2023, a noticeable increase in this ratio occurs, jumping to 0.23 and maintaining this elevated level in 2024. This shift indicates a higher reliance on debt financing relative to total capital in the latest two years under review.

Overall Insights

The financial data indicates a strategic shift in the company's capital structure starting in 2023. The marked rise in total debt and the corresponding increase in the debt to capital ratio suggest a greater dependency on debt, which could imply either expanded investment activities, refinancing, or other financial maneuvers that necessitate increased leverage. Simultaneously, total capital growth continues but at a moderated pace, emphasizing the growing significance of debt relative to equity or other capital components.

The financial data reveals several notable trends regarding the company's debt and capital structure over the analyzed periods.

Total debt (including operating lease liability)

The total debt has shown a general upward trajectory from 2019 to 2024. Initially, there was a moderate increase from $5,851 million in 2019 to $7,576 million in 2022. However, a sharp rise occurred between 2022 and 2023, with debt nearly doubling from $7,576 million to $13,999 million. The following year, the debt level remained almost stable, increasing slightly to $14,078 million in 2024.

Total capital (including operating lease liability)

Total capital steadily increased each year from $41,732 million in 2019 to $59,209 million in 2024. The growth was consistent, though the rate of increase appeared to slow somewhat after 2022, with smaller annual increments compared to previous years.

Debt to capital (including operating lease liability)

The debt-to-capital ratio was relatively stable from 2019 through 2022, fluctuating between 0.13 and 0.16. This indicates that debt made up about 13% to 16% of the total capital during these years. In 2023, there was a marked increase in this ratio to 0.24, which persisted into 2024. This jump reflects the significant growth in total debt relative to the more moderate rise in total capital during the same period.

In summary, the company maintained a conservative leverage position until 2022, after which a noticeable increase in debt levels altered the capital structure, resulting in a much higher debt-to-capital ratio. This shift may suggest a strategic decision to increase borrowing, which could impact financial risk and future capital costs.

Total Debt

The total debt increased gradually from 5,851 million US dollars in 2019 to 6,906 million in 2022. There was a significant surge in debt levels in 2023, nearly doubling to 13,330 million, followed by a slight further increase to 13,397 million in 2024.

Total Assets

Total assets showed a consistent upward trend over the entire period, growing from 48,887 million US dollars in 2019 to 69,416 million in 2024. There was a steady rise year over year, with a slight dip observed in 2023 compared to 2022, before increasing again in 2024.

Debt to Assets Ratio

The debt to assets ratio remained relatively stable at around 0.12 from 2019 through 2021, then decreased slightly to 0.10 in 2022, indicating a modest reduction in leverage relative to assets. However, there was a marked increase in this ratio in 2023 to 0.21, reflecting the sharp rise in debt relative to assets. In 2024, the ratio decreased slightly to 0.19, though it remained substantially higher than in previous years.

Total debt (including operating lease liability)

The total debt exhibited a general increasing trend over the analyzed period. Starting from $5,851 million in 2019, the debt steadily rose each year, with a notable acceleration observed between 2022 and 2023 when it nearly doubled from $7,576 million to $13,999 million. The debt level then remained relatively stable into 2024, increasing slightly to $14,078 million.

Total assets

Total assets showed consistent growth throughout the period. From $48,887 million in 2019, the assets expanded annually, reaching $66,283 million in 2022. A minor decline was observed in 2023, dropping to $64,254 million, but this was followed by a recovery in 2024, with assets rising again to $69,416 million.

Debt to assets ratio (including operating lease liability)

This ratio remained relatively stable and low from 2019 to 2022, fluctuating slightly between 0.11 and 0.13, indicating a conservative leverage position during this time. However, a significant increase occurred in 2023, with the ratio doubling to 0.22, corresponding to the sharp increase in total debt relative to assets. In 2024, the ratio corrected slightly to 0.20, still maintaining a higher leverage than in previous years.

Overall analysis

The data reveals a pattern of gradual growth in total assets alongside an initially moderate rise in debt levels. The year 2023 marks a critical shift, with a substantial increase in debt, outpacing the asset growth and resulting in a marked rise in leverage ratio. This suggests a strategic change in the company's capital structure or financing approach in 2023. Despite this, the company maintained overall asset growth, which partially mitigated the impact of increased indebtedness on the leverage ratio in 2024.

The analysis of the annual financial data reveals several noteworthy trends in the company's financial position over the six-year period.

Total assets

Total assets have shown a consistent upward trajectory from $48,887 million in 2019 to $69,416 million in 2024. This reflects a steady expansion of the company's asset base, with a notable increase between 2021 and 2022, followed by a slight decrease in 2023 before rising again in 2024.

Total Micron shareholders’ equity

Shareholders’ equity increased from $35,881 million in 2019 to $49,907 million in 2022, indicating growth in the company’s net worth during this period. However, it declined to $44,120 million in 2023 before slightly recovering to $45,131 million in 2024. This fluctuation suggests some variability in retained earnings or equity adjustments in the most recent years.

Financial leverage

Financial leverage, expressed as a ratio, remained relatively stable around 1.33 to 1.38 from 2019 through 2022, indicating a moderate and consistent use of debt relative to equity. However, from 2023 onward, leverage increased to 1.46 and further to 1.54 in 2024, implying a rising reliance on debt financing or a decrease in equity proportion relative to total assets.

Overall, these patterns suggest that the company has been steadily growing its asset base and maintaining a generally strong equity position up to 2022. The subsequent fluctuations in equity and the rising financial leverage in the last two years may warrant closer scrutiny to understand the underlying financing strategy and risk profile changes.

The earnings before interest and tax (EBIT) exhibit a fluctuating trend over the analyzed periods. Starting at 7,179 million US dollars in 2019, EBIT significantly declined to 3,184 million in 2020 before recovering to 6,438 million in 2021. This upward momentum continued into 2022, reaching a peak of 9,764 million US dollars. However, a sharp reversal occurred in 2023, with EBIT recording a substantial loss of 5,268 million US dollars, followed by a partial recovery to 1,791 million in 2024.

Interest expense shows a gradual increase throughout the period. Beginning at 128 million US dollars in 2019, it rose modestly to 194 million in 2020, followed by slight fluctuations in 2021 and 2022 (183 million and 189 million respectively). In 2023, there was a marked elevation to 388 million US dollars, which further increased to 562 million in 2024.

The interest coverage ratio demonstrates a strong yet volatile pattern. It started very high at 56.09 in 2019, indicating a robust ability to cover interest expenses, but then it declined sharply to 16.41 in 2020. The ratio improved again in 2021 and 2022, reaching 35.18 and 51.66 respectively, reflecting an enhanced capacity to meet interest obligations. In 2023, the ratio turned negative at -13.58, corresponding with the significant EBIT loss recorded that year, indicating that earnings were insufficient to cover interest expenses. In 2024, the ratio improved to 3.19, still low but suggesting a partial recovery in interest coverage capability.

Overall, the data reveal considerable volatility in operating earnings across the period, with a notable peak in 2022 followed by a sharp downturn in 2023 and partial recovery thereafter. The continuous increase in interest expense alongside fluctuating EBIT levels has led to significant variations in the interest coverage ratio, which underscores the company's changing ability to service its debt obligations over time.

Earnings Before Fixed Charges and Tax (EBITFC)

Over the six-year period, EBITFC exhibited significant volatility. Starting at a high of 7,272 million US dollars in 2019, it declined sharply to 3,286 million in 2020. This was followed by a substantial recovery to 6,546 million in 2021 and a further rise to a peak of 9,889 million in 2022. However, the next two years showed a marked deterioration, with EBITFC turning negative to -5,131 million in 2023, before recovering slightly to 1,931 million in 2024. The data indicates cyclical operational performance with a peak in 2022 and a notable loss in 2023.

Fixed Charges

Fixed charges showed a gradual but consistent upward trend throughout the period. Beginning at 221 million US dollars in 2019, the fixed charges increased modestly over the next three years to 314 million in 2022, followed by a more pronounced rise to 525 million in 2023 and 702 million in 2024. This trend suggests increasing financial obligations, possibly due to higher interest expenses or lease commitments.

Fixed Charge Coverage Ratio

The fixed charge coverage ratio, representing the ability to cover fixed charges with earnings before fixed charges and tax, mirrored the volatility seen in EBITFC. The ratio started very strong at 32.9 in 2019, indicating excellent coverage capacity. It then dropped significantly to 11.1 in 2020 but rebounded to 22.49 in 2021 and further improved to 31.49 in 2022, consistent with the rise in EBITFC. However, the ratio turned negative (-9.77) in 2023, reflecting the negative EBITFC and inability to cover fixed charges that year. There was a partial recovery in 2024 to 2.75, but coverage remained weak relative to earlier years. Overall, the declining coverage ratio in the final years highlights increased financial risk and diminished earnings support for fixed charges.