Debt-to-Equity Ratio

The debt-to-equity ratio measures how much a company relies on borrowed money versus shareholder funds to finance its operations; a ratio of 1.16x means SM Energy has $1.16 in debt for every $1.00 in equity.

This is above the energy sector median of 0.68x, placing SM Energy in the 69th percentile among its peers—meaning it is more leveraged than about 69% of sector companies. The year-over-year change is not available, but quarter-over-quarter the ratio rose 18.4% from 0.98x to 1.16x, indicating a recent increase in debt relative to equity. A high and rising debt-to-equity ratio can signal higher financial risk, as more earnings must go toward interest payments, but it may also reflect strategic borrowing to fund growth or acquisitions. Given that the level is above the median and the trend is upward, this metric adds a cautionary element to the investment profile. The NEUTRAL overall verdict is supported in part because the elevated leverage is offset by the company’s ability to manage that debt, but the ratio does not tilt the view strongly toward bullish or bearish.

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