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.