Digi International Inc (DGII)

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	38,273	50,154	38,318	10,384	11,055
Interest expense	US$ in thousands	15,415	25,236	19,690	1,385	3,592
Interest coverage		2.48	1.99	1.95	7.50	3.08

September 30, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $38,273K ÷ $15,415K
= 2.48

Digi International Inc's interest coverage has displayed some fluctuations over the past five years. In the most recent fiscal year ending September 30, 2024, the interest coverage ratio stood at 2.48, indicating that the company's operating profits were 2.48 times its interest expense for the period. This suggests that Digi International had sufficient earnings to cover its interest obligations, albeit with relatively less margin of safety compared to earlier years.

The trend over the last five years shows that the interest coverage ratio has generally been above 1, which is considered the minimum threshold for indicating ability to meet interest payments. The lower ratios in 2022 and 2023 could suggest a tighter financial position or increased interest expenses during those years.

The significant spike in the interest coverage ratio to 7.50 in 2021 indicates a substantial improvement, likely driven by either higher operating profits or a decrease in interest expenses during that period. A ratio above 5 or 6 is often seen as a sign of strong financial health and ability to comfortably meet interest obligations.

Overall, while Digi International Inc's interest coverage ratios have varied, the company has generally shown the ability to manage its interest payments. However, it would be prudent for stakeholders to monitor any significant fluctuations in the future, as sustained low ratios could indicate potential financial distress.