Archrock Inc (AROC)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 237,452 | 253,735 | 161,848 | 147,096 | 19,734 |
| Interest expense | US$ in thousands | 5,072 | 111,488 | 101,259 | 108,135 | 105,716 |
| Interest coverage | 46.82 | 2.28 | 1.60 | 1.36 | 0.19 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $237,452K ÷ $5,072K
= 46.82
Interest coverage is a key financial ratio that indicates a company's ability to meet its interest obligations on its debt. Looking at the data provided for Archrock Inc from 2020 to 2024, we can see a trend of improvement in the interest coverage ratio.
In December 31, 2020, the interest coverage ratio was extremely low at 0.19, indicating that Archrock Inc had limited ability to cover its interest expenses with its operating profits. However, in subsequent years, there was a significant improvement in the ratio.
By December 31, 2021, the interest coverage ratio increased to 1.36, showing a better ability to meet interest payments. This improvement continued with ratios of 1.60 in 2022 and 2.28 in 2023, reflecting a strengthening financial position and a more comfortable ability to cover interest expenses.
Notably, by December 31, 2024, the interest coverage ratio surged to 46.82, a substantial increase from previous years. This exceptionally high ratio indicates that Archrock Inc is generating significant operating profits relative to its interest expenses, suggesting strong financial health and a reduced risk of default on debt obligations.
Overall, the increasing trend in Archrock Inc's interest coverage ratio demonstrates an enhanced capacity to service its debt and signifies a positive trajectory for the company's financial performance.
Peer comparison
Dec 31, 2024