Freshpet Inc (FRPT)

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 59,785 -17,417 -50,273 -24,650 -1,911
Interest expense US$ in thousands 12,262 14,097 5,208 2,882 1,212
Interest coverage 4.88 -1.24 -9.65 -8.55 -1.58

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $59,785K ÷ $12,262K
= 4.88

Over the period from December 31, 2020, to December 31, 2024, Freshpet Inc's interest coverage ratio demonstrated significant fluctuations, indicative of evolving financial stability and varying profitability levels.

In 2020, the interest coverage ratio was recorded at -1.58, signaling that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses, resulting in a negative ratio. This negative trend persisted into 2021 and 2022, with ratios of -8.55 and -9.65, respectively. The worsening ratios during these years suggest that the company's ability to meet its interest obligations from operational earnings was increasingly compromised, possibly due to declining profitability or increased interest expenses.

By 2023, the ratio improved somewhat to -1.24, although it remained negative, which continued to reflect financial difficulties in covering interest costs solely from operating earnings. The persistent negative figures through these years generally indicate that the company was likely relying on external sources of financing or non-recurring items to meet interest obligations, or operating losses were substantial enough to prevent adequate coverage.

However, a notable shift occurred in 2024 when the interest coverage ratio turned positive, reaching 4.88. This improvement signifies that Freshpet Inc's earnings before interest and taxes exceeded its interest expenses by nearly five times, pointing to a substantial recovery in profitability or a reduction in interest burdens. Such a change suggests a potentially healthier financial position and the possible realization of operational improvements or other strategic initiatives that enhanced earnings capacity.

Overall, the interest coverage trend reflects a company that experienced considerable financial stress in the early to mid-2020s, but showed signs of significant improvement and increased capacity to service its interest obligations by 2024.