ON Semiconductor Corp. (NASDAQ:ON)

The analysis of the financial ratios over the reported periods reveals several notable trends in the company's capital structure and financial health.

Debt to Equity Ratio

This ratio exhibits an initial increase from 0.87 in March 2019, peaking near 1.47 in April 2020, indicating a higher proportion of debt relative to equity during that period. Subsequently, there is a steady and consistent decline through to March 2024, where the ratio decreases to 0.41. This suggests a gradual reduction in reliance on debt financing compared to equity over the more recent periods.

Debt to Capital Ratio

Similar to the debt to equity ratio, the debt to capital ratio starts moderately high around 0.46 in March 2019, rising to 0.60 by April 2020, marking the highest leverage point. From mid-2020 onward, the ratio declines steadily, reaching 0.29 by March 2024. This trend corroborates the observed deleveraging and a strengthening capital base.

Debt to Assets Ratio

The debt to assets ratio follows a comparable pattern, increasing initially to around 0.50 in early 2020 before embarking on a downward trajectory to about 0.25 by March 2024. This indicates a steady decrease in the portion of assets financed by debt, reflecting reduced financial risk related to asset financing.

Financial Leverage

The financial leverage ratio peaks near 2.94 in mid-2020, consistent with the earlier leverage metrics. Thereafter, it gently declines to 1.66 by the first quarter of 2024. The decrease in financial leverage points to a less leveraged equity position, implying greater equity coverage against assets and liabilities.

Interest Coverage Ratio

This ratio shows the most dramatic improvement. Data commences from a relatively low point of 2.87 in September 2019, declining sharply to 0.86 by April 2020 — a concerning sign of diminished ability to cover interest expenses during that period. A remarkable recovery follows, with the ratio rising continuously to an impressive 40.50 by March 2024. This substantial increase illustrates a strong improvement in earnings relative to interest obligations, highlighting enhanced profitability and liquidity.

Overall, the data delineates a period of increased leverage culminating around early 2020, likely related to strategic or market conditions necessitating higher debt levels. Subsequently, the company has systematically reduced its leverage ratios, signaling a deliberate focus on strengthening balance sheet health and reducing financial risk. Correspondingly, the marked improvement in interest coverage ratio reflects enhanced operational performance and greater capacity to service debt, underscoring an improvement in financial stability and creditworthiness over the analyzed timeframe.

Total debt

The total debt exhibits significant fluctuations over the analyzed periods. Starting at approximately 2.77 billion USD in March 2019, it increased to a peak around 4.74 billion USD by mid-2020. Following this peak, total debt generally declined, reaching around 3.07 billion USD by the end of 2021. In 2022 and early 2023, total debt stabilized near the 3.2 to 3.5 billion USD range, before declining again to slightly above 3.3 billion USD by March 2024. This pattern suggests initial borrowing increases followed by a gradual deleveraging trend.

Total ON Semiconductor Corporation stockholders’ equity

Stockholders’ equity consistently increased throughout the periods analyzed. Starting at about 3.2 billion USD in March 2019, equity rose steadily, with notable acceleration after mid-2020. By the end of 2021, equity surpassed 4.5 billion USD, and this upward momentum continued to reach over 8.1 billion USD by March 2024. The sustained growth in equity indicates strengthening financial foundations and accumulation of retained earnings or other equity components.

Debt to equity ratio

The debt to equity ratio reflects the company’s leverage trends and reveals a marked improvement over time. Initially close to 0.87 in early 2019, the ratio increased to peak levels of approximately 1.47 by April and July 2020, indicating higher reliance on debt relative to equity during this period. Subsequently, the ratio declined consistently, falling below 1.0 by the end of 2020 and continuing the downward trend to reach about 0.41 by March 2024. This decreasing ratio illustrates a reduction in financial leverage and an improvement in balance sheet strength.

Summary

Overall, the financial data indicates a phase of increased borrowing through 2020, followed by a strategic deleveraging, supported by steady growth in equity. The decline in the debt to equity ratio over the most recent periods reflects an enhanced equity base relative to debt, implying stronger capitalization and potentially reduced financial risk. This trend suggests an improving financial position and effective management of the company’s capital structure over the reported timeframe.

Total debt

The total debt exhibited a notable increase from March 2019 through April 2020, climbing from approximately $2.77 billion to nearly $4.73 billion. After this peak, it declined steadily over the next several quarters, reaching a low near $3.07 billion by December 2021. Subsequently, total debt fluctuated modestly, trending upward again in early 2023 to around $3.50 billion before decreasing once more to approximately $3.36 billion by March 2024.

Total capital

Total capital generally increased across the entire period, rising from roughly $5.97 billion in March 2019 to $11.48 billion by March 2024. The growth was relatively steady with occasional periods of accelerated expansion, especially noticeable after late 2021. This indicates an overall strengthening of the company’s capital base over the five-year span.

Debt to capital ratio

The debt to capital ratio rose initially, climbing from 0.46 in March 2019 to a peak of 0.60 by April 2020, reflecting increased leverage during this period. From that apex, the ratio demonstrated a consistent downward trend, declining steadily to 0.29 by March 2024. This decline suggests a reduction in reliance on debt relative to the total capital base and an improvement in the company’s financial leverage position over time.

Overall trends and insights

The data suggests that the company experienced significant debt accumulation through early 2020, likely in response to external conditions requiring increased borrowing. Subsequently, efforts appear to have been made to reduce leverage and strengthen the capital structure, as indicated by declining total debt levels and a rising total capital base. The consistent decrease in the debt to capital ratio over the latter part of the timeframe points to improved financial stability and reduced risk associated with debt financing. The fluctuations in debt levels in 2023 may reflect tactical borrowing adjustments or investment activities while maintaining a conservative leverage posture.

The data presents an overview of key financial metrics over multiple quarters, focusing on total debt, total assets, and the debt-to-assets ratio. Several notable trends and patterns emerge from the analysis of these figures.

Total Debt

The total debt demonstrates a fluctuating but generally downward trend in recent periods. Starting at approximately 2.77 billion US dollars in March 2019, total debt rises sharply to a peak of about 4.74 billion by mid-2020. After this peak, the debt level consistently declines, reaching around 3.36 billion by March 2024. This reduction in debt from the 2020 highs indicates active deleveraging or debt repayment efforts over the past several years.

Total Assets

Total assets show a steady upward trend throughout the observed timeline. Beginning near 7.56 billion US dollars in early 2019, assets gradually increase to approximately 13.48 billion by the first quarter of 2024. This growth, nearly doubling over the span, suggests ongoing asset accumulation or valuation increases, reflecting expansion or investments likely contributing to the firm's underlying value enhancement.

Debt to Assets Ratio

The debt to assets ratio moves in a generally decreasing direction, indicating improving financial leverage and a stronger asset base relative to liabilities. The ratio starts at 0.37 in March 2019 and increases to its highest point of 0.50 around April and July 2020, coinciding with the peak in total debt. Thereafter, it declines steadily to 0.25 by March 2024. This decline reflects a progressive reduction in leverage, likely improving financial stability and creditworthiness.

In summary, the financial data suggest that the company experienced increased leverage leading into 2020, which then reversed through consistent debt reduction amid continuing asset growth. The strengthening asset base, coupled with decreased relative indebtedness, points to an improving capital structure and potentially enhanced financial flexibility heading into 2024.

Total assets

The total assets displayed a general upward trend over the analyzed quarters from March 2019 to March 2024. Initially, the assets grew from approximately 7.56 billion USD to a peak near 9.53 billion USD by mid-2020. Following this peak, there was a moderate decline to about 8.67 billion USD by the end of 2020. Subsequently, total assets resumed an upward trajectory, reaching their highest point of approximately 13.48 billion USD in March 2024. This pattern indicates a recovery and substantial growth in asset base after a brief dip at the end of 2020, reflecting ongoing expansion or asset accumulation activities.

Total stockholders' equity

The stockholders' equity demonstrated consistent growth throughout the entire period. Starting from roughly 3.20 billion USD in March 2019, equity steadily increased, with no significant decreases recorded. By March 2024, stockholders’ equity had more than doubled, reaching approximately 8.12 billion USD. This steady increase suggests effective equity retention, profitability, or capital injections over time that have strengthened the company’s net worth and financial position.

Financial leverage ratio

The financial leverage ratio exhibited a declining trend over the reviewed quarters. Beginning at 2.37 in March 2019, the ratio rose slightly to a high of 2.94 in mid-2020, indicating increased use of debt relative to equity at that time. Thereafter, the leverage ratio consistently decreased, reaching 1.66 by March 2024. This decline suggests a gradual reduction in reliance on debt financing or an increase in equity relative to total assets, potentially lowering financial risk and improving financial stability.

The earnings before interest and tax (EBIT) show significant variability over the reported periods, exhibiting both sharp declines and robust recoveries. Initially, EBIT declined from 184,000 thousand US dollars in the first quarter of 2019 to a negative value of -43,900 thousand US dollars in the third quarter of 2019. Following this downturn, a recovery is apparent with EBIT increasing to 124,900 thousand US dollars by the fourth quarter of 2019 and continuing to improve into 2020 and beyond.

From 2020 onward, EBIT demonstrates a generally upward trend with notable peaks. The first quarter of 2021 marks a strong increase to 130,800 thousand US dollars, further accelerating to a high of 498,200 thousand US dollars by the last quarter of 2021. The upward momentum continues in 2022 with a peak of 790,800 thousand US dollars during the fourth quarter. Despite some fluctuations in 2023, EBIT remains substantially above the early periods, ending at 553,800 thousand US dollars in the first quarter of 2024.

The interest expense presents a different pattern, remaining relatively stable over the entire timeframe. Values range between 15,600 thousand US dollars and 42,200 thousand US dollars, with a slight general decline observed beginning in early 2022. The interest expense decreased from around 42,000 thousand US dollars in 2019 and 2020 to approximately 15,600 thousand US dollars by the first quarter of 2024, indicating reduced borrowing costs or debt levels.

The interest coverage ratio, which measures the company's ability to service interest obligations from operating earnings, reflects significant improvement. Early data is incomplete, but from the fourth quarter of 2019 onward, the ratio increased progressively from 2.87 to a peak of 40.5 by the first quarter of 2024. This trend suggests enhanced operational profitability relative to the cost of debt, reflecting stronger fiscal health and reduced financial risk.

Overall, the data reveals a fluctuating yet generally strengthening earnings performance coupled with a reduction in interest expenses and a markedly improved capacity to cover interest payments. These factors collectively indicate improved financial stability and operational efficiency in the most recent periods.