Micron Technology Inc. (NASDAQ:MU)

The analysis of the financial leverage and debt ratios reveals evolving trends over the examined periods. Initially, from 2020 to 2022, leverage indicators such as debt to equity, debt to capital, and debt to assets showcased a gradual decline, suggesting a conservative approach to debt financing and an improvement in capital structure quality. Specifically, the debt to equity ratio decreased from 0.17 to 0.14, indicating a reduction in reliance on debt relative to shareholders' equity.

However, from 2023 onwards, a noticeable shift occurs with an increase in these ratios. The debt to equity ratio nearly doubles from 0.14 in 2022 to 0.3 in 2023 and maintains a similar level through 2024, slightly decreasing to 0.27 by 2025. Correspondingly, the debt to capital and debt to assets ratios also approximately double in 2023 compared to the previous year before marginally decreasing by 2025. This pattern suggests a strategic decision to increase debt funding, potentially for expansion or other investment activities.

When including operating lease liabilities in the calculations, the ratios follow a consistent pattern but at slightly higher levels, illustrating the impact of lease obligations on the overall debt profile. The inclusion increases the debt ratios by a small margin across all reported periods, providing a more comprehensive view of financial obligations.

Financial leverage, measured as a ratio, remains relatively stable between 2020 and 2022, hovering around 1.33 to 1.38. Post-2022, this metric ascends to 1.46 in 2023 and further increases to 1.54 in 2024 before a marginal dip to 1.53 in 2025. This rise indicates that the company is employing more debt relative to equity to finance its assets in the later years.

The coverage ratios exhibit a somewhat volatile pattern. Interest coverage, referring to the ability to meet interest payments, increases significantly from 16.41 in 2020 to 51.66 in 2022, signaling robust earnings relative to interest expenses. However, in 2023, it sharply reverses to a negative value (-13.58), indicating an inability to cover interest expenses through operating earnings that year. Recovery is seen in subsequent years with the ratio climbing back to positive figures: 3.19 in 2024 and 21.26 in 2025.

Similarly, fixed charge coverage experiences a parallel trajectory, increasing from 11.1 in 2020 to 31.49 in 2022, then dropping to -9.77 in 2023, and subsequently recovering to 2.75 in 2024 and 16.34 in 2025. The negative coverage ratios in 2023 highlight a temporary period of financial stress or reduced operational earnings relative to fixed obligations.

In summary, the company demonstrated a conservative leverage stance in the early years followed by increased debt usage in the most recent periods. Coverage ratios suggest a temporary strain in 2023, possibly due to unusual expense or earnings volatility, with signs of recovery thereafter. The overall financial profile points to a phase of increased leverage coupled with fluctuating earnings coverage ability during the latest years under review.

Debt to Equity and Related Leverage Ratios

Decrease from 2020 to 2022, then increase in 2023, maintaining higher levels through 2025 with minor declines.

Operating lease liabilities moderately increase reported debt ratios.

Financial leverage ratio stable initially, then rising notably from 2023 onward.

Coverage Ratios

Interest and fixed charge coverage ratios generally improved from 2020 to 2022, indicating strong earnings coverage.

Significant negative coverage ratios in 2023 represent earnings shortfall relative to interest and fixed charges.

Recovery observed in 2024 and 2025 with coverage ratios returning to positive and improved levels.

Total Debt

The total debt exhibited a gradual increase from $6.643 billion in 2020 to $6.906 billion in 2022. However, a significant rise occurred between 2022 and 2023, with total debt nearly doubling to $13.330 billion. Following this surge, total debt continued to increase modestly, reaching $14.577 billion by 2025.

Shareholders’ Equity

Shareholders’ equity showed a consistent upward trend from $38.996 billion in 2020 to $49.907 billion in 2022. In 2023, equity decreased to $44.120 billion but resumed growth thereafter, reaching a high of $54.165 billion in 2025. This indicates resilience and recovery in equity levels after a dip in 2023.

Debt to Equity Ratio

The debt to equity ratio declined slightly from 0.17 in 2020 to 0.14 in 2022, reflecting improved leverage and possibly a stronger equity base relative to debt. Starting in 2023, the ratio more than doubled to 0.30, consistent with the notable increase in total debt during that period. It then stabilized around 0.27 to 0.30 through 2025, indicating a period of higher leverage maintained in subsequent years.

Total Debt (including operating lease liability)

The total debt exhibits a generally increasing trend over the six-year period, rising from $7,230 million in 2020 to $15,352 million in 2025. Notably, there is a significant jump between 2022 and 2023, where the debt nearly doubles from $7,576 million to $13,999 million, after which it continues to grow at a slower pace but still increasing through to 2025.

Shareholders’ Equity

Shareholders' equity shows growth over the analyzed period, increasing from $38,996 million in 2020 to $54,165 million in 2025. A peak is observed in 2022 at $49,907 million, followed by a decline in 2023, before recovering and reaching the highest value in 2025.

Debt to Equity Ratio (including operating lease liability)

The debt to equity ratio decreases from 0.19 in 2020 to 0.15 in 2022, indicating a strengthening equity base relative to debt. However, there is a sharp increase in the ratio to 0.32 in 2023, aligning with the substantial increase in total debt seen in that year. Following this peak, the ratio modestly declines to 0.28 by 2025, suggesting some improvement in the leverage position but still higher than the early years.

Summary of Financial Position

Overall, the financial data reflect an increasing capital structure leveraging with growing total debt and shareholders’ equity over time. The sharp rise in debt in 2023 adversely impacted leverage ratios, but subsequent years show some mitigation. The equity growth contributes positively to the company’s financial stability, although increased debt levels suggest a cautious approach to managing financial risk is warranted going forward.

Total Debt

The total debt level exhibited a gradual increase from 6,643 million USD in 2020 to 6,906 million USD in 2022. This was followed by a marked rise in 2023, where debt nearly doubled to 13,330 million USD and then showed a slight upward trend, reaching 14,577 million USD by 2025. This indicates a significant increase in liabilities starting in 2023.

Total Capital

Total capital grew steadily over the entire period, rising from 45,639 million USD in 2020 to 56,813 million USD in 2022, with a moderate increase in 2023 to 57,450 million USD and continuing upward to 68,742 million USD by 2025. The overall growth in total capital suggests an expansion in the company's funding base and asset base.

Debt to Capital Ratio

The debt to capital ratio decreased gradually from 0.15 in 2020 to 0.12 in 2022, indicating a relatively stronger equity position and lower financial leverage. However, the ratio increased sharply to 0.23 in 2023 and remained elevated around 0.21 to 0.23 through 2025. This shift reflects the notable increase in debt relative to total capital starting in 2023, signifying higher leverage and potentially increased financial risk.

Summary

Overall, the company maintained controlled debt levels through 2022 with steady capital growth. Beginning in 2023, there was a significant increase in total debt, outpacing the growth in total capital and leading to a higher debt to capital ratio. This indicates a strategic decision or necessity to utilize more debt financing, which may impact the company’s financial risk profile in the future.

Total Debt (including operating lease liability)

The total debt increased moderately from 7,230 million USD in 2020 to approximately 7,576 million USD in 2022, showing a stable debt level during this initial period. However, a significant rise occurred from 2022 to 2023, with total debt nearly doubling to 13,999 million USD. This elevated debt level continued growing gradually in the subsequent years, reaching 15,352 million USD by 2025.

Total Capital (including operating lease liability)

Total capital steadily grew throughout the entire timeframe. It rose from 46,226 million USD in 2020 to 57,483 million USD in 2022, followed by a slower growth to 58,119 million USD in 2023, and then increased further to 69,517 million USD by 2025. The growth in total capital indicates ongoing expansion or reinvestment by the company over these years.

Debt to Capital Ratio (including operating lease liability)

The debt to capital ratio declined gradually from 0.16 in 2020 to 0.13 in 2022, reflecting a decrease in leverage relative to capital during this period. However, in 2023, there was a sharp increase to 0.24, coinciding with the marked rise in total debt. This higher leverage ratio remained relatively stable through 2024 and slightly decreased to 0.22 in 2025, suggesting the company maintained a higher level of financial leverage in recent years compared to the earlier period.

Total Debt

The total debt shows a generally increasing trend over the examined periods. Starting from approximately 6,643 million USD, it gradually rose to 6,906 million USD by 2022. Thereafter, a substantial increase occurred, with debt nearly doubling to 13,330 million USD in 2023. A modest rise continued in the following two years, reaching 14,577 million USD by 2025. This sharp increase in debt around 2023 suggests significant financing activities or investments during that period.

Total Assets

The total assets experienced consistent growth over the analyzed timeframe. Beginning at roughly 53,678 million USD in 2020, assets increased steadily each year, reaching 66,283 million USD by 2022. A minor fluctuation occurred in 2023 with a slight decline to 64,254 million USD, followed by a resumption of growth to 82,798 million USD by 2025. This demonstrates an overall expansion in asset base, indicating positive growth or acquisition activity.

Debt to Assets Ratio

The debt to assets ratio remained relatively stable at about 0.10 to 0.12 from 2020 through 2022, indicating conservative leverage. However, a notable increase was observed in 2023, when the ratio rose to 0.21, reflecting the significant rise in total debt relative to assets during that year. Subsequently, the ratio slightly decreased to 0.19 in 2024 and further to 0.18 in 2025, suggesting partial deleveraging or asset growth outpacing debt increases after the peak in 2023.

Total debt (including operating lease liability)

The total debt exhibited a gradual increase from 7230 million USD in 2020 to 7576 million USD in 2022. A significant rise occurred in 2023, with debt nearly doubling to 13999 million USD. This upward trend continued moderately through 2024 and 2025, reaching 15352 million USD by the latter year.

Total assets

Total assets increased steadily from 53678 million USD in 2020 to 66283 million USD in 2022, demonstrating consistent growth. A slight dip to 64254 million USD was observed in 2023, followed by a recovery and stronger growth thereafter, with assets rising to 69416 million USD in 2024 and substantially increasing to 82798 million USD by 2025.

Debt to assets (including operating lease liability)

The debt to assets ratio decreased from 0.13 in 2020 to 0.11 in 2022, indicating an improvement in leverage relative to asset size. However, this ratio jumped sharply to 0.22 in 2023, reflecting the significant increase in total debt during that year. Following this peak, the ratio decreased gradually to 0.2 in 2024 and further to 0.19 in 2025, suggesting some deleveraging or asset growth outpacing debt accumulation in these periods.

Total assets

Total assets showed a consistent upward trend over the observed periods, increasing from $53,678 million in 2020 to $82,798 million in 2025. This reflects a substantial growth in the company's asset base, indicating expansion or significant investment activities. Notably, there was a slight decrease between 2022 and 2023, from $66,283 million to $64,254 million, before resuming growth in subsequent years.

Shareholders’ equity

Shareholders' equity also increased from $38,996 million in 2020 to $54,165 million in 2025. However, the equity value experienced a dip from 2022 to 2023, falling from $49,907 million to $44,120 million, followed by a modest recovery over the next two years. This pattern suggests fluctuations in retained earnings, comprehensive income, or share issuances/buybacks during that interval.

Financial leverage

The financial leverage ratio was relatively stable around 1.33 to 1.38 from 2020 through 2022, suggesting moderate use of debt relative to equity. From 2023 onward, the ratio increased to approximately 1.53-1.54, indicating increased reliance on debt financing or other liabilities compared to shareholders' equity. This rise in leverage coincides with the period when total assets increased markedly but equity growth was more subdued.

Earnings before interest and tax (EBIT)

The EBIT displayed a consistent upward trend from 2020 through 2022, rising significantly from 3,184 million US dollars to 9,764 million US dollars. However, in 2023, there was a sharp reversal with EBIT turning negative to -5,268 million US dollars, indicating operational challenges or increased costs. Subsequently, EBIT recovered in 2024 and 2025, with the figures reaching 1,791 million and 10,140 million US dollars respectively, highlighting a strong rebound and improved profitability in the most recent period.

Interest Expense

Interest expense remained relatively stable from 2020 through 2022, fluctuating modestly between 183 and 194 million US dollars. However, there was a significant increase in 2023, culminating at 388 million US dollars. This rising trend continued in 2024, reaching a peak of 562 million US dollars, before decreasing to 477 million US dollars in 2025. This pattern suggests a rise in debt-related costs or changes in borrowing conditions, particularly in the middle periods.

Interest Coverage Ratio

The interest coverage ratio exhibited a strong and improving trend from 2020 to 2022, increasing from 16.41 to 51.66, indicating substantial growth in the ability to meet interest obligations from operating earnings. However, in 2023, the ratio turned negative (-13.58), reflecting the negative EBIT and consequent inability to cover interest expenses through operating income. The ratio improved in 2024 to 3.19 and further strengthened to 21.26 in 2025, signaling enhanced financial stability and improved earnings relative to interest costs after the downturn.

The financial data demonstrates notable volatility in the company's earnings before fixed charges and tax over the examined periods. Initially, there is a substantial increase from 3,286 million US dollars in 2020 to a peak of 9,889 million US dollars in 2022. However, this positive trend is interrupted in 2023 when earnings before fixed charges and tax turn negative, registering a loss of 5,131 million US dollars. In subsequent years, there is a partial recovery, with earnings rising to 1,931 million US dollars in 2024 and then sharply increasing again to 10,293 million US dollars in 2025.

Fixed charges exhibit a steady upward progression, growing from 296 million US dollars in 2020 to 630 million US dollars in 2025. This represents more than a doubling over the period, with the most significant single-year increase occurring between 2022 and 2023, jumping from 314 million to 525 million US dollars.

The fixed charge coverage ratio, which indicates the company's ability to cover fixed charges with earnings before fixed charges and tax, closely mirrors the fluctuations in earnings. It increases significantly from 11.1 in 2020 to a high of 31.49 in 2022, reflecting strong coverage capacity. The ratio then plummets to a negative value of -9.77 in 2023, corresponding with the negative earnings figure for the same year, implying that earnings were insufficient to meet fixed charges. Following this dip, the ratio recovers partially to 2.75 in 2024 and continues to improve to 16.34 in 2025, suggesting a strengthening position in meeting fixed financial obligations.

Summary of Trends

- Earnings before fixed charges and tax showed strong growth initially, faced a significant downturn in 2023, and then rebounded substantially by 2025.

- Fixed charges steadily increased throughout the period, indicating rising fixed financial obligations.

- The fixed charge coverage ratio aligns with the earnings trend, signaling varying capacity to cover fixed charges over time with a critical low point in 2023 and recovery thereafter.