American Water Works (AWK)
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 | 1,718,000 | 1,504,000 | 1,273,000 | 1,196,000 | 1,248,000 |
| Interest expense | US$ in thousands | 523,000 | 460,000 | 433,000 | 403,000 | 408,000 |
| Interest coverage | 3.28 | 3.27 | 2.94 | 2.97 | 3.06 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,718,000K ÷ $523,000K
= 3.28
Based on the data provided for American Water Works' interest coverage ratio over the years, we observe a slight fluctuation in the values.
The interest coverage ratio for the company has ranged from a low of 2.94 on December 31, 2022, to a high of 3.28 on December 31, 2024. This indicates that the company's ability to cover its interest expenses with its operating earnings has remained relatively stable over the period in consideration.
Generally, a higher interest coverage ratio is favorable as it suggests that the company is in a better position to meet its interest obligations. In this case, American Water Works' interest coverage ratios above 3 indicate that the company is generating sufficient earnings to comfortably cover its interest expenses, although there was a slight dip in 2022.
It is important for investors and creditors to monitor this ratio to ensure that the company's ability to pay its interest obligations remains strong and consistent over time.
Peer comparison
Dec 31, 2024