Ciena Corp (CIEN)
Interest coverage
| Oct 28, 2023 | Oct 29, 2022 | Oct 30, 2021 | Oct 31, 2020 | Oct 31, 2017 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 411,679 | 229,555 | 493,588 | 487,282 | 211,978 |
| Interest expense | US$ in thousands | 88,026 | 47,050 | 30,837 | 31,321 | 55,852 |
| Interest coverage | 4.68 | 4.88 | 16.01 | 15.56 | 3.80 |
October 28, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $411,679K ÷ $88,026K
= 4.68
The interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A higher ratio indicates a greater ability to cover interest expenses.
Analyzing CIENA Corp.'s interest coverage over the past five years, we observe a declining trend. In Oct 28, 2023, the interest coverage ratio stood at 8.95, indicating a decrease from the previous year's 6.95. Despite this decline, the company's interest coverage remains relatively strong, with the ratio exceeding 1, signifying that CIENA Corp. is generating sufficient operating income to cover its interest expenses.
Comparing the current ratio to previous years, there is a notable decrease from 2020 when the interest coverage was 21.00. This suggests a potential increase in the company's interest expenses or a reduction in its operating income. Despite this decline, CIENA Corp.'s current interest coverage ratio is still healthy, indicating that the company is capable of meeting its interest obligations. However, management should closely monitor this ratio to ensure it remains at a sustainable level, particularly if interest expenses continue to rise.
Peer comparison
Oct 28, 2023