Allegro Microsystems Inc (ALGM)

Interest coverage

		Mar 31, 2024	Dec 31, 2023	Sep 30, 2023	Jun 30, 2023	Mar 31, 2023	Dec 23, 2022	Sep 23, 2022	Jun 30, 2022	Mar 31, 2022	Dec 31, 2021	Sep 30, 2021	Jun 30, 2021
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	205,369	251,418	283,922	269,730	213,386	175,283	142,255	121,226	140,978	129,888	66,020	39,868
Interest expense (ttm)	US$ in thousands	10,763	6,136	2,895	2,668	2,177	1,840	1,654	2,351	2,098	5,282	2,257	1,379
Interest coverage		19.08	40.97	98.07	101.10	98.02	95.26	86.01	51.56	67.20	24.59	29.25	28.91

March 31, 2024 calculation

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

Allegro Microsystems Inc's interest coverage ratio has displayed considerable fluctuations over the past few quarters. The ratio, which measures the company's ability to cover its interest expenses with its operating income, peaked at 101.10 in June 2023, indicating a very strong ability to service its interest obligations.

However, since then, the interest coverage ratio has shown a declining trend, reaching 19.08 in March 2024. This significant drop raises some concerns about Allegro Microsystems Inc's ability to cover its interest expenses from its operating income.

It is worth noting that a higher interest coverage ratio is generally preferred by investors and creditors as it signifies a lower risk of default. Therefore, the downward trend in Allegro Microsystems Inc's interest coverage ratio should be carefully monitored to assess its impact on the company's financial stability and debt repayment capacity.