Allegro Microsystems Inc (ALGM)

Interest coverage

		Mar 31, 2024	Mar 31, 2023	Mar 31, 2022	Mar 31, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	205,369	213,545	143,097	2,229
Interest expense	US$ in thousands	10,763	2,336	2,499	3,828
Interest coverage		19.08	91.41	57.26	0.58

March 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $205,369K ÷ $10,763K
= 19.08

Interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. A higher interest coverage ratio indicates a stronger ability to cover interest expenses.

Analyzing Allegro Microsystems Inc's interest coverage ratio over the past four years shows a fluctuating trend. In Mar 31, 2024, the interest coverage ratio was 19.08, significantly lower than the previous year's ratio of 91.41, suggesting a decrease in the company's ability to cover interest expenses. This could be a concern if the trend continues in the future.

In Mar 31, 2023, the company's interest coverage ratio was exceptionally high at 91.41, indicating a very strong ability to cover interest expenses. The ratio dropped to 57.26 in Mar 31, 2022 but remained at a healthy level, reflecting the company's ability to generate enough earnings to cover its interest obligations.

However, in Mar 31, 2021, Allegro Microsystems Inc had a very low interest coverage ratio of 0.58, indicating a potential risk as the company only earned enough to cover a fraction of its interest payments. This implies a significant improvement in the company's financial health since then.

Overall, while the recent decrease in the interest coverage ratio for Allegro Microsystems Inc may raise concerns, the company still maintains a reasonable ability to meet its interest obligations based on the historical trend. It is essential for investors and creditors to monitor this ratio closely to assess the company's financial health and ability to manage its debt effectively.