O’Reilly Automotive Inc. (NASDAQ:ORLY)

Debt to Equity

The debt to equity ratio shows a substantial increase from 4.56 in 2017 to 29.4 in 2020, indicating a marked rise in the company’s financial leverage over this period. The inclusion of operating lease liabilities further amplifies this trend, with the ratio increasing from 4.56 in 2017 to 43.95 in 2020. This suggests a growing reliance on debt and lease obligations relative to equity.

Debt to Capital

This ratio increased steadily from 0.82 in 2017 to above 1.0 in 2021, reaching 1.02, which indicates that the company’s total debt slightly exceeded the sum of debt and equity by the end of the period. Including operating lease liabilities, the ratio follows a similar trend, moving from 0.82 in 2017 to around 1.01 in 2021. This reflects an overall increase in the proportion of debt in the company’s capital structure.

Debt to Assets

The debt to assets ratio exhibited a declining pattern, dropping from 0.39 in 2017 to 0.33 in 2021, implying a decrease in debt relative to total assets. However, when operating lease liabilities are included, the ratio is higher and shows a different trend, increasing initially from 0.39 in 2017 to 0.55 in 2019 before gradually declining to 0.5 in 2021. This highlights the significant impact operating leases have on the company’s total liabilities relative to assets.

Financial Leverage

Financial leverage surged dramatically from 11.59 in 2017 to 82.68 in 2020, indicating that the company’s assets financed by shareholders' equity have decreased substantially, pointing to increased use of debt and lease financing. There is no data provided for 2021, but the trend up to 2020 reflects a strong upward trajectory.

Interest Coverage Ratio

The interest coverage ratio declined from 18.93 in 2017 to 13.79 in 2019, indicating a reduction in the company’s ability to cover interest expenses with operating income. However, an improvement is observed from 2019 onwards, reaching 20.22 in 2021, suggesting strengthening earnings relative to interest costs.

Fixed Charge Coverage

The fixed charge coverage ratio shows a slight decline from 5.16 in 2017 to 4.82 in 2018, followed by a gradual increase reaching 6.61 in 2021. This indicates improved capacity over time to cover fixed charges such as debt interest and lease expenses with operating income.

Total Debt

The total debt consistently increased from 2,978,390 thousand US dollars at the end of 2017 to a peak of 4,123,217 thousand US dollars at the end of 2020. In 2021, there was a decline to 3,826,978 thousand US dollars, indicating a reduction in leverage after reaching the highest point in 2020.

Shareholders’ Equity (Deficit)

Shareholders’ equity showed a downward trend over the observed period. Beginning at 653,046 thousand US dollars in 2017, it declined sharply by 2018 to 353,667 thousand US dollars. It showed a slight recovery in 2019 to 397,340 thousand US dollars but then dropped significantly to 140,258 thousand US dollars in 2020 and further into a deficit of -66,423 thousand US dollars in 2021. This trend reflects increasing losses or distributions exceeding equity.

Debt to Equity Ratio

The debt to equity ratio demonstrated a substantial increase from 4.56 in 2017 to 9.66 in 2018, remaining relatively stable at 9.79 in 2019. A sharp spike occurred in 2020, with the ratio reaching 29.4, highlighting extreme leverage likely driven by decreased equity. The value for 2021 is not provided, but based on trends in debt and equity, the ratio may have remained elevated or worsened.

The financial data reveals several notable trends related to the company's debt levels, equity position, and leverage ratios over the five-year span ending in 2021.

Total debt (including operating lease liability)

The total debt has shown a significant increase from 2017 to 2020, rising from approximately $2.98 billion to $6.16 billion. However, in 2021, there is a slight reduction to around $5.87 billion. This pattern suggests a period of aggressive debt accumulation followed by a marginal deleveraging.

Shareholders’ equity (deficit)

Shareholders’ equity exhibits a declining trend throughout the period. Starting positive at roughly $653 million in 2017, the equity steadily decreases, crossing below zero in 2021 to a deficit of approximately $66 million. The negative equity figure in 2021 indicates that liabilities have exceeded assets, which may raise concerns about the financial stability of the company at that point.

Debt to equity (including operating lease liability)

The debt to equity ratio escalates sharply from 4.56 in 2017 to an extreme 43.95 in 2020. The absence of data for 2021 makes it difficult to comment on the latest trend, but this marked increase over the years signals a substantial rise in financial leverage, largely driven by rising debt and shrinking equity. The spike in 2020 particularly highlights a precarious capital structure, potentially reflecting increased financial risk.

Overall, the data illustrates a challenging financial trajectory characterized by growing indebtedness and deteriorating equity. The company's leverage position intensified markedly over the period, culminating in a negative shareholders’ equity figure. This financial profile suggests heightened risk exposure and signals the need for focused financial management strategies to restore balance sheet strength.

Total debt

The total debt increased consistently from 2,978,390 thousand US dollars at the end of 2017 to a peak of 4,123,217 thousand US dollars at the end of 2020. It then decreased in 2021 to 3,826,978 thousand US dollars. This indicates an overall upward trend in leverage with a slight reduction in the most recent year analyzed.

Total capital

Total capital showed an initial increase from 3,631,436 thousand US dollars in 2017 to a high of 4,287,867 thousand US dollars in 2019. Following this, it experienced a slight decline over the next two years, closing at 3,760,555 thousand US dollars in 2021. This suggests a peak in capital resources around 2019 with some contraction thereafter.

Debt to capital ratio

The debt to capital ratio rose steadily from 0.82 in 2017 to above parity at 1.02 in 2021. The incremental increases year-over-year indicate a growing reliance on debt financing relative to total capital. The ratio exceeding 1.00 in 2021 suggests that total debt surpassed reported capital, which could imply increased financial risk or a shift in the capital structure favoring debt.

Overall analysis

The data illustrates a trend toward increasing leverage, with total debt growing significantly until 2020 and then slightly retreating in 2021. Total capital expanded until 2019 but then declined, potentially reflecting capital attrition or changes in equity or retained earnings. The rising debt to capital ratio highlights an intensification of debt usage, culminating in debt levels that exceed total capital by the end of the period. This pattern indicates possible challenges related to financial risk management and may warrant closer monitoring of debt servicing capacity and capital adequacy.

Total debt (including operating lease liability)

The total debt value exhibited a consistent upward trend from 2017 through 2020, increasing from approximately 2.98 billion USD to over 6.16 billion USD. There was a slight decrease observed in 2021, with total debt declining to roughly 5.87 billion USD. This pattern suggests aggressive debt accumulation over the initial four years, followed by a modest reduction in the final year of the period analyzed.

Total capital (including operating lease liability)

Total capital followed a similar trajectory, rising steadily from around 3.63 billion USD in 2017 to a peak of approximately 6.31 billion USD in 2020. However, in 2021, total capital decreased notably to about 5.80 billion USD. This decline corresponds with the reduction in total debt observed in the same year, indicating a potential rebalancing or deleveraging of the capital structure.

Debt to capital ratio (including operating lease liability)

The debt to capital ratio reveals a clear increasing trend over the five-year span. Starting at 0.82 in 2017, the ratio climbed each year, surpassing the 1.00 mark in 2021 at 1.01. This increasing ratio indicates that debt is growing at a faster rate than total capital, implying a rising leverage level. The ratio above 1.00 in 2021 suggests that total debt slightly exceeds total capital, highlighting increased financial risk or a strategic decision to utilize more debt financing.

Total Debt

The total debt exhibited a general upward trend from 2017 through 2020, increasing from approximately 2.98 billion US dollars to over 4.12 billion US dollars. However, in 2021, there was a notable decline to around 3.83 billion US dollars, indicating a reduction in leverage or repayment of some debt obligations during the most recent period.

Total Assets

Total assets consistently increased over the five-year period, rising from about 7.57 billion US dollars at the end of 2017 to over 11.7 billion US dollars by the end of 2021. This steady growth reflects an expansion in asset base, which could signify investments, acquisitions, or accumulation of capital assets.

Debt to Assets Ratio

The debt to assets ratio, which measures the proportion of a company’s assets financed by debt, shows a somewhat fluctuating but overall declining trend from 0.39 in 2017 to 0.33 in 2021. Notably, this ratio peaked at 0.43 in 2018, then decreased sharply in 2019 and remained relatively stable in 2020 before further decline in 2021. The downward trend suggests an improvement in financial leverage, with the company relying less on debt relative to its assets over time.

The financial data reveals significant movements in the company's debt and asset levels over the five-year period ending in 2021.

Total debt (including operating lease liability)

The total debt level shows a consistent upward trend from 2017 through 2020, increasing from approximately $2.98 billion to about $6.16 billion. In 2021, a slight reduction is observed, with total debt decreasing marginally to approximately $5.87 billion. This pattern indicates a substantial growth in leverage through 2019 and 2020, followed by a modest deleveraging in the final year.

Total assets

Total assets increased steadily each year, rising from approximately $7.57 billion in 2017 to about $11.72 billion in 2021. The overall growth indicates ongoing asset base expansion, reflecting investments or acquisitions. The largest annual increase occurred between 2018 and 2019, when assets grew by roughly $2.74 billion, suggesting significant capital deployment during that period.

Debt to assets ratio (including operating lease liability)

The ratio exhibits a rising trend from 0.39 in 2017 to a peak of 0.55 in 2019, indicating a rising proportion of debt relative to assets during this period. From 2019 onwards, the ratio declines to 0.5 by 2021, suggesting an improvement in the balance between debt and asset levels. This decline reflects the combination of slightly lower debt and continued asset growth in the later years.

Collectively, the data demonstrates a period of aggressive debt accumulation correlated with rapid asset growth up to 2019, followed by a stabilization phase where leverage ratios begin to moderate despite ongoing asset expansion. This suggests a strategic focus on managing leverage while continuing to grow the asset base in recent years.

The financial data for the entity over the five-year period from 2017 to 2021 reveals several notable trends in the total assets, shareholders’ equity, and financial leverage ratios.

Total Assets

Total assets exhibited a consistent upward trend throughout the period. Starting from approximately US$7.57 billion at the end of 2017, the assets increased to nearly US$8.0 billion in 2018, followed by a significant rise to about US$10.7 billion in 2019. The growth trend continued, albeit at a slower pace, reaching approximately US$11.6 billion in 2020 and US$11.7 billion in 2021. This steady increase suggests an expansion of the company's asset base over time.

Shareholders’ Equity (Deficit)

Contrary to the growth in total assets, shareholders' equity demonstrates a declining pattern with volatility. Initially, equity stood at around US$653 million in 2017, then dropped sharply to roughly US$354 million in 2018. A slight recovery occurred in 2019 with equity increasing to approximately US$397 million, but this was followed by a substantial decline to about US$140 million in 2020. By the end of 2021, shareholders’ equity had turned negative, reaching a deficit of approximately US$-66 million. This inversion from positive equity to a deficit indicates financial distress or significant losses affecting owners’ stake in the company.

Financial Leverage

Available data for financial leverage reveals a marked increase over the four recorded years. Starting at 11.59 in 2017, the leverage ratio nearly doubled to 22.57 in 2018 and further increased to 26.97 in 2019. A dramatic surge was noticed in 2020, with the ratio jumping to 82.68. The data for 2021 is not provided. The rising financial leverage indicates increasing reliance on debt relative to equity, which aligns with the decline in shareholders’ equity and suggests elevated financial risk and potential solvency challenges.

The financial data reveals a progressive improvement in earnings performance over the five-year period. The Earnings Before Interest and Tax (EBIT) consistently increased each year from 2017 to 2021, with a notable acceleration in growth starting in 2019. The EBIT rose from approximately $1.73 billion in 2017 to nearly $2.93 billion by the end of 2021, indicating strengthening operational profitability.

Interest expense values demonstrate a fluctuating but overall upward trend until 2020, rising from about $91.3 million in 2017 to a peak of approximately $161.1 million in 2020. However, there was a decline in interest expense in 2021, decreasing to about $144.8 million, which may suggest some reduction in borrowing costs or lower debt levels.

The interest coverage ratio, which measures the company’s ability to meet its interest obligations from EBIT, shows variability but an overall strong position throughout the period. The ratio decreased from 18.93 in 2017 to a low of 13.79 in 2019, indicating increased pressure on interest coverage during those years. Afterwards, it improved significantly to 20.22 by 2021, reflecting enhanced earnings capacity relative to interest expenses and suggesting stronger financial health and solvency by the end of the examined period.

Earnings before interest and tax (EBIT)

Consistent growth from $1.73 billion in 2017 to $2.93 billion in 2021, with accelerated growth from 2019 onwards.

Interest expense

Increasing trend from 2017 to 2020, peaking at $161.1 million, followed by a reduction to $144.8 million in 2021.

Interest coverage ratio

Declined from 18.93 in 2017 to 13.79 in 2019, then improved sharply to 20.22 by 2021, indicating improved ability to cover interest expenses.

Earnings before fixed charges and tax

The earnings before fixed charges and tax demonstrated a consistent upward trend over the five-year period. Starting at approximately 2.03 billion US dollars in 2017, this figure grew each year, reaching nearly 3.28 billion US dollars by the end of 2021. The most notable increases occurred between 2019 to 2020 and 2020 to 2021, indicating an accelerating growth rate in earnings during these years.

Fixed charges

Fixed charges also increased from 394.1 million US dollars in 2017 to a peak of 497.3 million US dollars in 2020. However, in 2021, fixed charges showed a slight decline to approximately 496.1 million US dollars. Overall, the fixed charges exhibit a rising trend initially but then stabilize around the 496 million mark in the final year analyzed.

Fixed charge coverage ratio

The fixed charge coverage ratio, which indicates the ability to cover fixed charges from earnings, fluctuated between 4.82 and 6.61 over the period. Starting at 5.16 in 2017, it dipped to its lowest at 4.82 in 2018 but then showed a general upward trend, reaching the highest level of 6.61 by 2021. This increasing ratio suggests an improving capacity to meet fixed financial obligations through operational earnings.