Alkermes Plc (ALKS)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 281,151 | -154,264 | -28,087 | -87,878 | -183,455 |
| Interest expense | US$ in thousands | 23,032 | 13,040 | 11,219 | 8,659 | 13,601 |
| Interest coverage | 12.21 | -11.83 | -2.50 | -10.15 | -13.49 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $281,151K ÷ $23,032K
= 12.21
Interest coverage ratio is an important financial metric used to assess the ability of a company to pay its interest expenses from its operating earnings. The interest coverage ratio is calculated by dividing earnings before interest and taxes (EBIT) by the interest expense.
Looking at the historical data for Alkermes plc, we observe that the interest coverage ratio has been fluctuating significantly over the past five years. In 2022, the interest coverage ratio was -26.29, indicating that the company's operating earnings were not sufficient to cover its interest expenses. This suggests a significant financial strain on the company's ability to meet its interest obligations.
In 2021, the interest coverage ratio improved to -3.32, but still remained negative, indicating a continued struggle in meeting interest expenses from operating earnings. The ratio further deteriorated in 2020 to -66.17, signaling a substantial decline in the company's ability to cover its interest costs.
Unfortunately, data for 2023 and 2019 is not available in the provided table. However, based on the trend observed from the available data, it is evident that Alkermes plc has been facing challenges in generating sufficient operating earnings to cover its interest expenses in recent years.
A persistent negative interest coverage ratio can be a cause for concern for investors and creditors as it signifies a high-risk financial position for the company. It may indicate a need for Alkermes plc to address its financial leverage and profitability issues to ensure sustainable operations and meet its debt obligations in the future.
Peer comparison
Dec 31, 2023