Western Digital Corp. (NASDAQ:WDC)

Debt to equity

The debt to equity ratio exhibited a general downward trend from 0.97 in 2018 to 0.6 in 2023, with a peak at 1.06 in 2019. This decline indicates a gradual reduction in leverage relative to shareholders' equity after 2019, suggesting a more conservative capital structure over time.

Debt to equity (including operating lease liability)

Including operating lease liabilities, the debt to equity ratio closely mirrors the standard measure, peaking at 1.06 in 2019 and decreasing to 0.63 by 2023. The similarity between the two measures implies that operating lease liabilities have had a moderate but consistent effect on leverage calculations.

Debt to capital

The debt to capital ratio slightly declined from 0.49 in 2018 to 0.38 in 2023, indicating a gradual decrease in debt relative to total capital. This suggests that the company has been reducing its reliance on debt financing within its capital structure during this period.

Debt to capital (including operating lease liability)

With operating lease liabilities included, the debt to capital ratio follows a similar trajectory, decreasing from 0.49 in 2018 to 0.39 in 2023. This small increase compared to the standard ratio signals that lease obligations contribute modestly to total capital and affect the reported leverage to a slight extent.

Debt to assets

The debt to assets ratio declined steadily from 0.38 in 2018 to 0.29 in 2023, signaling a reduction in debt used to finance total assets. This trend reflects potentially improved asset financing through equity or retained earnings rather than debt.

Debt to assets (including operating lease liability)

When factoring in operating lease liabilities, the ratio decreases from 0.38 in 2018 to 0.30 in 2023, showing a similar pattern to the standard measure but indicating that leases slightly increase the measured leverage compared to debt alone.

Financial leverage

Financial leverage peaked at 2.69 in 2020 but subsequently fell to 2.08 by 2023. The downward trend after 2020 suggests a deliberate effort to decrease overall leverage, indicating stronger equity backing relative to assets and a potentially lower risk profile.

Interest coverage

Interest coverage exhibited significant volatility, dropping sharply from 4.08 in 2018 to a low of 0.39 in 2019 before recovering to 7.98 in 2022. However, the ratio turned negative (-4) in 2023, indicating that earnings before interest and taxes were insufficient to cover interest expenses that year, highlighting potential distress or negative operating earnings.

Fixed charge coverage

This ratio similarly mirrored the interest coverage pattern, declining substantially from 3.88 in 2018 to 0.44 in 2019, then recovering up to 6.86 in 2022 before falling to -2.98 in 2023. The negative value in 2023 signals insufficient earnings to cover fixed charges, underscoring financial challenges in meeting fixed financial obligations during that period.

Total Debt

The total debt amount shows a consistent downward trend over the analyzed periods, decreasing from $11,172 million in June 2018 to $7,070 million in June 2023. This reduction suggests a progressive effort to reduce leverage or refinance debt under potentially more favorable terms. The most significant declines occur between 2021 and 2022, indicating a strategic focus on deleveraging during that timeframe.

Shareholders' Equity

Shareholders' equity exhibits some variations with a general upward tendency toward the latter years. Beginning at $11,531 million in June 2018, it dipped to $9,967 million in June 2019 and reached its lowest at $9,551 million in July 2020. Following this trough, equity recovered, peaking at $12,221 million in July 2022 before slightly declining to $11,723 million in June 2023. These fluctuations could reflect changes in retained earnings, issuance or repurchase of shares, or other comprehensive income components.

Debt to Equity Ratio

The debt to equity ratio reveals an improving capital structure stability across the period. Initially close to parity at 0.97 in June 2018, it increased marginally to 1.06 in June 2019, reflecting a higher proportion of debt relative to equity. Subsequently, the ratio consistently declined, reaching 0.6 in June 2023. This trend corresponds with the decreasing debt levels and the recovery in equity, indicating enhanced financial leverage control and potentially reduced risk.

The financial data indicates several notable trends concerning debt levels, shareholders' equity, and the debt-to-equity ratio over six fiscal years ending in mid-2023.

Total Debt (including operating lease liability)

The total debt has exhibited a consistent downward trend from 11,172 million US dollars in June 2018 to 7,354 million US dollars in June 2023. This decline suggests the company reduced its debt burden steadily, with the most significant decrease occurring between 2021 and 2022, where debt dropped from 8,962 to 7,339 million US dollars. The stabilization of debt between 2022 and 2023 indicates a possibly cautious approach to maintaining or slightly increasing liabilities after a period of deleveraging.

Shareholders' Equity

Shareholders' equity fluctuated over the period. Beginning at 11,531 million US dollars in June 2018, it decreased to a low of 9,551 million in July 2020, reflecting possible reduced retained earnings or asset valuations. After 2020, equity values recovered, reaching a peak of 12,221 million US dollars in July 2022 before slightly declining to 11,723 million in June 2023. This trend indicates recovery and growth in the company’s net asset base after a period of contraction.

Debt to Equity Ratio (including operating lease liability)

The debt-to-equity ratio shows a general decline from 0.97 in June 2018, peaking at 1.06 in June 2019, and then gradually decreasing to 0.63 in June 2023. The elevated ratio in the 2018-2019 period suggests higher leverage relative to equity, but the decline thereafter reflects a shift towards a more conservative capital structure with reduced reliance on debt financing. The ratio falling below one after 2019 highlights improved financial stability and a stronger equity base relative to the amount of debt.

Overall, the company appears to have progressively strengthened its balance sheet by lowering total debt while gradually growing equity, resulting in a lower leverage ratio which enhances financial flexibility and potentially reduces financial risk over the analyzed period.

Total Debt

The total debt exhibits a clear downward trend from 2018 through 2022, decreasing from $11,172 million to $7,022 million. This represents a significant reduction in debt over this period. However, in 2023, the total debt slightly increased to $7,070 million, showing a marginal uptick after several years of decline.

Total Capital

Total capital shows a consistent decrease from 2018 to 2020, falling from $22,703 million to $19,126 million. From 2020 to 2021, it stabilizes somewhat around $19,446 million and then slightly decreases again in the following two years, reaching $18,793 million in 2023. Overall, the capital base has contracted over the six-year span, with minor fluctuations in the latter years.

Debt to Capital Ratio

The debt to capital ratio remains close to 0.50 between 2018 and 2020, indicating that debt comprised about half of the total capital during this period. This ratio then notably declines in 2021 to 0.45 and further decreases to 0.36 in 2022, suggesting an improvement in the capital structure with reduced reliance on debt. In 2023, there is a slight increase to 0.38, aligning with the minor rise observed in total debt but still significantly lower than the earlier levels.

Total debt (including operating lease liability)

The total debt shows a consistent downward trend from fiscal year 2018 through 2023. Beginning at $11,172 million in 2018, the debt decreases steadily each year, reaching $7,354 million by 2023. This represents a significant reduction in leverage over the six-year period.

Total capital (including operating lease liability)

Total capital also decreases over the period but at a slower and less consistent pace. Starting at $22,703 million in 2018, it declines to $19,077 million in 2023. Notably, the total capital exhibits a slight increase between 2020 and 2021, followed by subsequent declines, indicating minor fluctuations amid an overall downward trajectory.

Debt to capital ratio (including operating lease liability)

The debt to capital ratio starts at 0.49 in 2018 and rises slightly to 0.51 in 2019 and 2020. After 2020, the ratio declines to 0.46 in 2021 and further decreases to 0.38 in 2022, before a small uptick to 0.39 in 2023. This pattern suggests an initial increase in leverage relative to capital, followed by a strengthening of the capital structure as debt is reduced more quickly than capital. The slight increase in 2023 may indicate minor changes in the capital or debt composition but remains significantly lower than earlier years.

The analysis of the financial data over the six-year period reveals notable trends in the company's debt levels, asset base, and leverage ratio.

Total debt

The total debt exhibits a consistent downward trend from 2018 through 2022, decreasing from $11,172 million in 2018 to $7,022 million in 2022. This represents a significant reduction in debt, suggesting a deliberate strategy to deleverage the balance sheet. However, in 2023 there is a slight uptick to $7,070 million, indicating a possible stabilization or a minor increase in borrowing after several years of decline.

Total assets

Total assets declined from $29,235 million in 2018 to $24,429 million in 2023. The reduction appears gradual with minor fluctuations but an overall downward trajectory. This decline in asset base might reflect asset sales, depreciation, or restructuring activities impacting the company's total resources.

Debt to assets ratio

The debt to assets ratio decreases from 0.38 in 2018 to a low of 0.27 in 2022, reflecting the combined effect of declining debt and a shrinking asset base. This trend demonstrates an improvement in the company's leverage position, with less reliance on debt relative to the size of its assets. In 2023, the ratio rises slightly to 0.29, consistent with the small increase in total debt and continued asset decline.

Overall, the company has achieved a reduction in leverage over the period, primarily through lowering total debt. Simultaneously, the asset base has contracted moderately, which impacts the debt-to-assets ratio but does not negate the trend toward improved financial leverage. The slight reversal in total debt and leverage ratio in the most recent year may warrant attention to understand underlying causes and potential implications for future financial strategy.

The financial data presents a clear trend in the company's leverage and asset base over a six-year period. Total debt, inclusive of operating lease liabilities, shows a consistent decline from 11,172 million US dollars in 2018 to 7,354 million US dollars in 2023. This represents a reduction in the company's total debt by approximately 34% over the observed timeframe.

Total assets exhibit a generally downward trend as well, decreasing from 29,235 million US dollars in 2018 to 24,429 million US dollars in 2023. This indicates a contraction in the asset base by roughly 16% across the six years.

In terms of leverage, the debt to assets ratio initially fluctuates, increasing slightly from 0.38 in 2018 to 0.40 in 2019, then declining steadily to a low of 0.28 in 2022 before a modest increase to 0.30 in 2023. This trend reflects a reduction in the company's relative debt burden compared to its assets over the period, pointing to an improving debt structure and possibly a stronger balance sheet.

Overall, the data suggests that the company has been actively managing its debt levels downward while experiencing a moderate decrease in asset holdings. The improved debt to assets ratio implies enhanced financial stability and potentially greater resilience to market fluctuations.

The analysis of the financial data over the six-year period reveals several significant trends in the company's asset base, equity, and financial leverage.

Total assets

The total assets demonstrated a declining trend overall. Starting at US$29,235 million in mid-2018, there was a decrease to US$26,370 million in 2019, followed by a further decline through 2020 and 2021, stabilizing somewhat around US$26,000 million. By mid-2023, total assets had decreased to US$24,429 million. This reflects a gradual shrinkage in the company's asset base over the period.

Shareholders’ equity

Shareholders’ equity showed a downward trend initially, falling from US$11,531 million in 2018 to US$9,551 million in 2020. However, it subsequently increased over the next two years, reaching a peak of US$12,221 million in 2022 before a slight decline to US$11,723 million in 2023. This pattern indicates some recovery and strengthening of the equity base after the early declines.

Financial leverage (ratio)

The financial leverage ratio saw an initial increase from 2.54 in 2018 to 2.69 in 2020, suggesting a rise in dependence on debt relative to equity. However, from 2021 onward, the ratio decreased steadily to 2.08 by mid-2023, indicating a reduction in leverage and possibly an improved equity position or reduced debt levels.

Overall, the data portrays a company that experienced asset contraction and equity reduction in the early years of the period, followed by a phase of equity strengthening and deleveraging. The decline in total assets could imply asset sales, depreciation, or strategic refocusing, while the recovery in equity and reduction in leverage suggest efforts to improve financial stability and reduce risk exposure towards the end of the timeframe.

Earnings Before Interest and Tax (EBIT)

The EBIT figures exhibit significant fluctuations over the six-year period. Initially, there is a sharp decline from 2761 million USD in 2018 to 182 million USD in 2019. A moderate recovery to 367 million USD occurs in 2020, followed by a more pronounced increase to 1253 million USD in 2021 and a further increase to 2427 million USD in 2022. However, in 2023, EBIT turns negative, reaching -1248 million USD, indicating a substantial deterioration in operating profitability.

Interest Expense

Interest expense shows a consistent downward trend from 676 million USD in 2018 to 304 million USD in 2022. In 2023, interest expense experiences a slight increase to 312 million USD. This generally declining trend suggests an improvement in debt management or refinancing at lower rates, although the recent increase may warrant attention.

Interest Coverage Ratio

The interest coverage ratio, which measures the ability to meet interest obligations from operating earnings, mirrors the volatility seen in EBIT. The ratio starts at a healthy 4.08 in 2018 but plunges drastically to 0.39 in 2019, indicating difficulty covering interest expenses. It improves gradually to 0.89 in 2020 and then rises significantly to 3.84 in 2021 and 7.98 in 2022, reflecting strong coverage and improved financial stability. In 2023, however, the ratio declines sharply to -4, consistent with the negative EBIT, signifying inability to cover interest expenses and heightened financial stress.

Earnings before fixed charges and tax (EBFCT)

The earnings before fixed charges and tax experienced considerable volatility over the period analyzed. Starting at a strong level in 2018 (US$2,810 million), there was a sharp decline in 2019 to US$229 million. This was followed by a modest recovery in 2020 (US$422 million) and a more significant increase in 2021 (US$1,303 million). The upward trend continued into 2022, reaching US$2,485 million, nearly matching the initial 2018 value. However, in 2023, there was a dramatic reversal with EBFCT dropping to a negative US$1,191 million, indicating a loss before fixed charges and tax for that year.

Fixed charges

Fixed charges showed a generally downward trend from 2018 through 2022. Starting at US$725 million in 2018, fixed charges decreased steadily each year to US$399 million by 2023. The most significant reductions occurred between 2018 and 2021, with a slower decline thereafter. This decline in fixed charges suggests possible reductions in interest expenses or other fixed financial obligations during this period.

Fixed charge coverage ratio

The fixed charge coverage ratio, which measures the ability to cover fixed charges with earnings before fixed charges and tax, displayed substantial fluctuations. In 2018, the ratio was a healthy 3.88, indicating strong coverage. However, it plummeted in 2019 to 0.44, signifying difficulty in covering fixed charges. A slight improvement was observed in 2020 (0.9), followed by a significant recovery in 2021 (3.47) and a peak in 2022 (6.86), reflecting very comfortable coverage. The ratio then deteriorated sharply in 2023 to -2.98, consistent with negative earnings before fixed charges and tax. This negative ratio signals financial stress and an inability to meet fixed charges from operating earnings.

Overall insights

The data reveals a cycle of financial performance starting with strong earnings and fixed charge coverage in 2018, followed by a severe dip in 2019 and 2020. Recovery is evident in 2021 and peaks in 2022, with both earnings and coverage reaching robust levels. However, the sharp decline in 2023, highlighted by negative earnings before fixed charges and tax and a negative coverage ratio, raises concerns about the company’s financial stability in that year. The persistent decrease in fixed charges over the period could indicate efforts to reduce financial obligations, but this was not sufficient to sustain profitability or coverage in 2023. Monitoring future performance and investigating the causes of the 2023 downturn will be critical for assessing ongoing financial health.