Avient Corp (AVNT)
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 | 196,800 | 243,300 | 279,700 | 111,600 | 156,800 |
| Interest expense | US$ in thousands | 106,300 | 69,400 | 72,600 | 70,800 | 67,000 |
| Interest coverage | 1.85 | 3.51 | 3.85 | 1.58 | 2.34 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $196,800K ÷ $106,300K
= 1.85
The interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. A higher ratio indicates a company is more capable of covering its interest obligations.
Looking at Avient Corp's interest coverage over the past five years, we observe a varying trend. In 2023, the interest coverage ratio decreased to 1.71 from 2.03 in 2022. Although it is still above 1, suggesting that the company earned 1.71 times the interest expense, it implies a slight weakening in Avient Corp's ability to cover its interest payments from its operating income in 2023.
Comparing this to the previous years, we see that the interest coverage ratio was significantly higher in 2021 at 5.06, indicating a strong ability to meet interest obligations. In 2020 and 2019, the ratios were 2.54 and 2.64 respectively, showing relatively consistent performance in covering interest expenses during those years.
Overall, while the recent decrease in interest coverage ratio in 2023 may raise a cautionary flag, it is important to monitor future trends and assess the company's ability to generate sufficient operating income to comfortably cover its interest payments.
Peer comparison
Dec 31, 2023