Deluxe Corporation (DLX)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 199,822 | 168,669 | 213,902 | 219,806 | 48,975 |
| Interest expense | US$ in thousands | 123,281 | 125,643 | 94,400 | 55,600 | 23,100 |
| Interest coverage | 1.62 | 1.34 | 2.27 | 3.95 | 2.12 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $199,822K ÷ $123,281K
= 1.62
The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. Deluxe Corporation's interest coverage has shown fluctuations over the past five years. In 2020, the interest coverage ratio was 2.12, indicating that the company generated 2.12 times the amount needed to cover its interest expenses.
Subsequently, there was an improvement in 2021, with the interest coverage ratio increasing to 3.95, suggesting better financial health and increased capacity to cover interest payments. However, in 2022, the ratio decreased to 2.27, reflecting a slight decline in the company's ability to service its interest obligations.
The interest coverage ratio took a significant downturn in 2023, dropping to 1.34. This sharp decline may raise concerns about Deluxe Corporation's ability to cover its interest expenses using its operating income.
In 2024, the interest coverage ratio improved to 1.62, indicating a slight recovery from the previous year. However, the ratio remains below the ideal level of 2 or higher, signaling ongoing challenges for Deluxe Corporation in meeting its interest payment obligations with its current earnings.
Overall, the varying trends in Deluxe Corporation's interest coverage ratio suggest fluctuations in the company's financial performance and its ability to manage debt effectively. It would be prudent for stakeholders to closely monitor this ratio and assess the company's strategies for improving its interest coverage in the future.