Archrock Inc (AROC)
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 | 253,735 | 161,848 | 147,096 | 19,734 | 162,866 |
| Interest expense | US$ in thousands | 111,488 | 101,259 | 108,135 | 105,716 | 104,681 |
| Interest coverage | 2.28 | 1.60 | 1.36 | 0.19 | 1.56 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $253,735K ÷ $111,488K
= 2.28
Interest coverage measures a company's ability to pay its interest expenses on outstanding debt using its operating income. A higher interest coverage ratio indicates a more comfortable financial position in meeting interest payments.
Looking at Archrock Inc's interest coverage ratios over the past five years, we observe some fluctuations. In 2023, the interest coverage ratio improved to 2.32 from 1.43 in 2022, indicating an increase in the company's ability to cover its interest expenses. This improvement suggests that Archrock Inc's operating income has increased sufficiently to cover its interest obligations.
Comparing to the previous years, the 2023 interest coverage ratio of 2.32 is higher than both 2021 and 2022, but lower than 2020 and 2019. This indicates that although there has been an improvement in 2023, the company's ability to cover interest expenses was stronger in 2020 and 2019.
Overall, the increase in Archrock Inc's interest coverage ratio in 2023 is a positive sign, suggesting an improvement in the company's ability to meet its interest obligations. However, it is important to monitor future trends in this ratio to ensure the continued financial health of the company.
Peer comparison
Dec 31, 2023