The Debt-to-Equity Ratio for Signet Jewelry has increased from 1.43 in 2019 to 2.42 in 2020.
Rebecca Cline
Analyzing Signet Jewelry. The current data that is available is for FY20, which also includes information for FY19.
Debt to Equity ratio IBISWorld: 2020 = 4.0 2019 = 3.9
Debt to Equity ratio Signet Jewelry: 2020 = 2.42 2019 = 1.43
Times Interest Earned ratio IBISWorld: 2020 = 3.46 2019 = 3.78
Times Interest Earned ratio Signet Jewelry: 2020 = 5.36 2019 = 5.53
The Debt-to-Equity Ratio for Signet Jewelry has increased from 1.43 in 2019 to 2.42 in 2020. This increase indicates that Signet Jewelry is requiring an increase in debt from their lenders. In 2019, Signet Jewelry required .99 less assistance in comparison to 2020. The rise in the Debt-to-Equity ratio indicates that Signet Jewelry has a little risk for investors, although the company is still a strong investment. Signet Jewelry is well below the average of the jewelry industry according to IBISWorld. In 2020, Signet Jewelry was 1.58 below the Jewelry industry average, which shows that Signet Jewelry is still a good investment when measuring with the Debt-to-Equity ratio (FY 2020 Annual Report, 2020).
The Times Interest Earned ratio is a measurement to see if a company is able to pay current debt obligations based on current incomes. The Times Interest Earned ratio for Signet Jewelry in 2020 was 5.36 and in 2019 was 5.53. This is well above the industry average of 3.46 in 2020 (FY 2020 Annual Report, 2020). Typically, when investors are looking at the Times Interest Earned ratio, they are looking for a ratio greater than 2.5 (Horton, 2019). When a company has a ratio of greater than 2.5, it indicates to investors that the company is able to manage its debt payments. Although a company is able to manage its debt payments, does not make it a safe investment alone, but the higher the ratio the less of a risk (Horton, 2019). Signet Jewelry has a greater Times Interest Earned ratio than the industry average for 2020 indicating that they are in a good place to be able to pay their debt.
Signet Jewelry did not have a significant change in either Debt-to-Equity Ratio or Times Interest Earned ratio between 2019 and 2020.
As a lender, I would be willing to lend money to Signet Jewelry. Signet Jewelry appears to be in a good place to repay their debt based on these ratios. Although the Debt-to-Equity Ratio for Signet Jewelry is slightly higher than I would like, it is much better than the industry average, which indicates that the company is in a better place than the majority of other Jewelry stores.
Resources:
FY 2020 Annual Report. Signet Jewelers. (2020, May 1). https://s26.q4cdn.com/755441662/files/doc_financials/annual/Signet-2020-Annual-Report.pdf.
Horton, M. (2019, June 25). What does a high-times interest earned ratio signify for a company’s future? Investopedia. https://www.investopedia.com/ask/answers/030615/what-does-high-times-interest-earned-ratio-signify-regard-companys-future.asp.
IBISWorld. (https://www.ibisworld.com/)
Porter, G., & Norton, C. (2018). Using financial accounting information: The alternative to debits and credits (10th ed.). Retrieved from https://www.cengage.com
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