Choice Hotels International Inc (CHH)

Interest coverage

		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	Dec 31, 2019	Sep 30, 2019	Jun 30, 2019	Mar 31, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	400,736	429,675	438,416	462,977	480,603	494,634	511,723	481,890	423,172	340,525	214,083	100,742	102,034	154,212	215,782	310,825	316,736	302,810	318,604	325,086
Interest expense (ttm)	US$ in thousands	63,780	58,235	51,429	46,411	43,797	43,658	45,934	46,373	46,680	46,981	48,034	49,425	49,028	49,225	48,965	46,976	46,807	45,923	45,198	45,810
Interest coverage		6.28	7.38	8.52	9.98	10.97	11.33	11.14	10.39	9.07	7.25	4.46	2.04	2.08	3.13	4.41	6.62	6.77	6.59	7.05	7.10

December 31, 2023 calculation

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

Choice Hotels International Inc has shown a generally positive trend in its interest coverage ratio over the past five quarters. The interest coverage ratio measures the company's ability to meet its interest payment obligations with its operating income.

The company's interest coverage ratio has been consistently above 5, indicating a healthy ability to cover its interest expenses. The ratio peaked at 11.33 in September 2022, indicating strong operating income relative to its interest payments. Despite a slight dip in the ratio in the first quarter of 2023, it has remained above 9, which is a positive sign.

The improving trend in Choice Hotels International Inc's interest coverage ratio suggests that the company's financial health is strengthening, as its operating income is increasing relative to its interest expenses. A higher interest coverage ratio is generally preferred by investors and creditors as it signifies a lower risk of default due to insufficient operating income.