Topbuild Corp (BLD)

Interest coverage

Dec 31, 2024 Sep 30, 2024 Jun 30, 2024 Mar 31, 2024 Dec 31, 2023 Sep 30, 2023 Jun 30, 2023 Mar 31, 2023 Dec 31, 2022 Sep 30, 2022 Jun 30, 2022 Mar 31, 2022 Dec 31, 2021 Sep 30, 2021 Jun 30, 2021 Mar 31, 2021 Dec 31, 2020 Sep 30, 2020 Jun 30, 2020 Mar 31, 2020
Earnings before interest and tax (EBIT) (ttm) US$ in thousands 897,625 893,705 893,219 924,535 900,099 891,268 870,332 835,566 798,850 712,412 623,713 545,123 462,587 447,488 415,225 367,416 355,542 329,367 308,856 304,878
Interest expense (ttm) US$ in thousands 2,881 21,348 39,457 75,370 74,614 72,207 67,938 62,790 56,717 50,870 41,812 34,507 29,144 25,956 28,145 30,317 32,456 33,794 35,609 36,963
Interest coverage 311.57 41.86 22.64 12.27 12.06 12.34 12.81 13.31 14.08 14.00 14.92 15.80 15.87 17.24 14.75 12.12 10.95 9.75 8.67 8.25

December 31, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $897,625K ÷ $2,881K
= 311.57

Topbuild Corp's interest coverage ratio has shown a positive trend over the reported period, starting at 8.25 on March 31, 2020, and reaching a peak of 311.57 on December 31, 2024. This indicates the company's ability to meet its interest payment obligations from its operating income has significantly improved.

The interest coverage ratio exceeding 1 indicates that the company is generating enough operating profit to cover its interest expenses. A ratio above 2 is generally considered healthy, as it shows a comfortable buffer. Topbuild Corp's interest coverage consistently exceeded this threshold throughout the period, reflecting a strong financial position.

The significant increase in the interest coverage ratio from 22.64 on June 30, 2024, to 311.57 on December 31, 2024, is notable and suggests a substantial improvement in the company's ability to service its debt. However, such a sharp increase may warrant further investigation to ensure it is sustainable and not driven by any one-time or extraordinary factors.

Overall, the trend of increasing interest coverage ratios demonstrates Topbuild Corp's ability to manage its debt efficiently and indicates a lower risk of default on its interest payments. Investors and creditors often view a high interest coverage ratio positively, as it reflects financial stability and the company's capacity to withstand economic downturns.