Allegro Microsystems Inc (ALGM)

Interest coverage

		Mar 31, 2025	Mar 31, 2024	Mar 31, 2023	Mar 31, 2022	Mar 31, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	—	205,560	213,682	141,803	1,152
Interest expense	US$ in thousands	30,366	10,763	2,336	1,057	2,603
Interest coverage		0.00	19.10	91.47	134.16	0.44

March 31, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $—K ÷ $30,366K
= 0.00

The interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A higher interest coverage ratio indicates a stronger ability to cover interest payments.

Analyzing Allegro Microsystems Inc's interest coverage over the years, we can see a significant fluctuation in the ratio:

- As of March 31, 2021, the interest coverage ratio was 0.44, indicating that the company was struggling to cover its interest payments with its operating income.
- By March 31, 2022, the ratio surged to 134.16, which is a substantial improvement and suggests that the company's operating income is more than sufficient to cover its interest expenses.
- The ratio remained strong at 91.47 as of March 31, 2023, indicating continued stability in the company's ability to meet its interest obligations.
- However, there was a notable decline in the interest coverage ratio to 19.10 by March 31, 2024. This could suggest increased financial strain or reduced operating income relative to interest expenses.
- Finally, the interest coverage ratio dropped to 0.00 as of March 31, 2025. This implies that Allegro Microsystems Inc's operating income may not be enough to cover its interest payments, raising concerns about the company's financial health and ability to meet debt obligations.

In summary, while Allegro Microsystems Inc showed improvement in its interest coverage ratio from 2021 to 2023, the significant decline in subsequent years raises red flags regarding its financial stability and ability to service its debt.