Advance Auto Parts Inc (AAP)
Interest coverage
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Oct 7, 2023 | Sep 30, 2023 | Jul 15, 2023 | Jun 30, 2023 | Apr 22, 2023 | Mar 31, 2023 | Dec 31, 2022 | Oct 8, 2022 | Sep 30, 2022 | Jun 30, 2022 | Apr 23, 2022 | Mar 31, 2022 | Dec 31, 2021 | Oct 9, 2021 | Sep 30, 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | -638,242 | 119,723 | 73,231 | -52,443 | -4,032 | 180,586 | 329,929 | 464,166 | 474,346 | 509,315 | 563,125 | 657,490 | 717,438 | 749,687 | 699,901 | 745,409 | 773,147 | 814,805 | 951,205 | 974,136 |
| Interest expense (ttm) | US$ in thousands | 81,254 | 80,410 | 81,012 | 81,751 | 56,876 | 59,683 | 40,276 | 50,587 | 66,533 | 57,703 | 69,742 | 50,231 | 34,285 | 35,114 | 32,780 | 31,160 | 39,747 | 26,879 | 25,480 | 16,893 |
| Interest coverage | -7.85 | 1.49 | 0.90 | -0.64 | -0.07 | 3.03 | 8.19 | 9.18 | 7.13 | 8.83 | 8.07 | 13.09 | 20.93 | 21.35 | 21.35 | 23.92 | 19.45 | 30.31 | 37.33 | 57.67 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $-638,242K ÷ $81,254K
= -7.85
The interest coverage ratio reflects the ability of a company to meet its interest obligations on outstanding debt. A higher interest coverage ratio indicates that the company is more capable of servicing its debt.
Looking at the data provided for Advance Auto Parts Inc, the interest coverage ratio has shown a downward trend over the periods analyzed. The interest coverage ratio was at a relatively strong level of 57.67 as of September 30, 2021. However, it started declining and dropped to 13.09 by December 31, 2022.
The trend continued with a further decrease to -0.07 as of December 31, 2023, indicating that the company's earnings were insufficient to cover its interest expenses, potentially signaling financial distress. The negative interest coverage ratio suggests that the company's operating income was not sufficient to cover its interest expenses.
Subsequently, the interest coverage ratio improved slightly to 1.49 as of September 30, 2024. While this shows some improvement, it is important to note that a ratio below 1 indicates that the company's earnings are insufficient to cover its interest expenses, which could raise concerns about its financial health and ability to meet debt obligations.
In summary, the declining trend in Advance Auto Parts Inc's interest coverage ratio, particularly the periods where it fell below 1, may raise concerns about its ability to comfortably cover its interest payments from earnings, indicating potential financial challenges that merit attention and further analysis.
Peer comparison
Dec 31, 2024