Central Garden & Pet Company (CENT)
Interest coverage
| Sep 30, 2024 | Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 198,622 | 219,016 | 256,639 | 252,378 | 196,910 |
| Interest expense | US$ in thousands | 57,527 | 57,025 | 58,253 | 58,597 | 44,016 |
| Interest coverage | 3.45 | 3.84 | 4.41 | 4.31 | 4.47 |
September 30, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $198,622K ÷ $57,527K
= 3.45
The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. An interest coverage ratio of 3.45 in 2024 indicates that Central Garden & Pet Company generated 3.45 times more earnings before interest and taxes (EBIT) than the interest expenses for that year.
Comparing this to previous years, the trend shows a gradual decline in the interest coverage ratio from 4.47 in 2020 to 3.45 in 2024. This declining trend may raise concerns about the company's ability to cover its interest payments from operating income.
While a ratio of 3.45 still indicates that the company is generating enough earnings to cover its interest expenses, investors and creditors typically prefer to see a higher interest coverage ratio to ensure a greater margin of safety. It would be important for Central Garden & Pet Company to monitor and potentially improve its interest coverage ratio in the future to maintain financial stability and meet its debt obligations comfortably.
Peer comparison
Sep 30, 2024