Federal Signal Corporation (FSS)

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	222,700	161,200	122,100	130,400	146,600
Interest expense	US$ in thousands	19,700	10,300	4,500	5,700	7,900
Interest coverage		11.30	15.65	27.13	22.88	18.56

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $222,700K ÷ $19,700K
= 11.30

Federal Signal Corp.'s interest coverage has displayed variability over the past five years. The company's ability to cover its interest expenses improved significantly from 2019 to 2021, with interest coverage ratios of 18.94, 23.65, and 28.58, respectively. However, there was a slight decrease in 2022 to 15.56 and a further decline in 2023 to 11.42.

The higher interest coverage ratios in 2021 and 2020 indicate that Federal Signal Corp. earned significantly more operating income relative to its interest expenses during those years, reflecting a strong financial position. The subsequent decrease in the interest coverage ratio in 2022 and 2023 may raise concerns about the company's ability to meet its interest obligations through its operating profits.

Overall, while Federal Signal Corp. has shown historically strong interest coverage ratios, the recent decline suggests a potential strain on the company's ability to cover its interest expenses with its current level of operating income. Further analysis would be necessary to determine the factors contributing to this downward trend and assess the company's overall financial health.