Deluxe Corporation (DLX)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 165,335 | 178,697 | 149,218 | 49,852 | -181,058 |
| Interest expense | US$ in thousands | 125,643 | 94,454 | 55,554 | 23,140 | 34,682 |
| Interest coverage | 1.32 | 1.89 | 2.69 | 2.15 | -5.22 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $165,335K ÷ $125,643K
= 1.32
The interest coverage ratio for Deluxe Corp. has shown a declining trend over the last five years. In 2023, the interest coverage ratio was at 1.64, which indicates that the company's operating income was able to cover its interest expenses 1.64 times. This represents a decrease from the previous year's ratio of 2.25.
The declining trend in the interest coverage ratio may raise concerns about the company's ability to meet its interest obligations with its operating income. A lower interest coverage ratio suggests that Deluxe Corp. may have a higher risk of defaulting on its debt payments. It is important for investors and creditors to closely monitor this ratio to assess the company's financial health and ability to manage its debt effectively.
Furthermore, when comparing the current interest coverage ratio of 1.64 to the ratios from 2021, 2020, and 2019, it is evident that Deluxe Corp.'s ability to cover its interest expenses has weakened significantly over the years. This may be a red flag for stakeholders and could indicate potential financial distress if not addressed promptly.