Choice Hotels International Inc (CHH)

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	400,736	480,603	423,172	102,034	316,736
Interest expense	US$ in thousands	63,780	43,797	46,680	49,028	46,807
Interest coverage		6.28	10.97	9.07	2.08	6.77

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $400,736K ÷ $63,780K
= 6.28

Choice Hotels International Inc's interest coverage ratio has fluctuated over the past five years, ranging from a low of 2.08 in 2020 to a high of 10.97 in 2022. The interest coverage ratio measures the company's ability to meet its interest obligations from operating profits. A higher ratio indicates a stronger ability to cover interest payments with operating income.

In 2023, the interest coverage ratio was 6.28, indicating that Choice Hotels had sufficient operating income to cover its interest expenses 6.28 times over. This suggests a healthy ability to service its debt obligations. However, it is lower compared to 2022 and 2021, where the ratio was above 9, indicating a stronger position in those years. The significant increase in 2022 to 10.97 could be attributed to higher operating profits or lower interest expenses during that period.

The low point in 2020 with a ratio of 2.08 indicates a potential concern as it suggests that the company's operating income was only sufficient to cover its interest payments 2.08 times over, which may have strained its financial resources. The 6.77 ratio in 2019 shows a moderate level of interest coverage.

Overall, Choice Hotels International Inc's interest coverage ratio has shown fluctuations over the past five years, with 2022 being the strongest year in terms of covering interest expenses. Investors and stakeholders should monitor this ratio to assess the company's ability to meet its debt obligations in the future.