GMS Inc (GMS)
Interest coverage
| Apr 30, 2025 | Jan 31, 2025 | Oct 31, 2024 | Jul 31, 2024 | Apr 30, 2024 | Jan 31, 2024 | Oct 31, 2023 | Jul 31, 2023 | Apr 30, 2023 | Jan 31, 2023 | Oct 31, 2022 | Jul 31, 2022 | Apr 30, 2022 | Jan 31, 2022 | Oct 31, 2021 | Jul 31, 2021 | Apr 30, 2021 | Jan 31, 2021 | Oct 31, 2020 | Jul 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 202,494 | 300,381 | 381,042 | 411,080 | 443,924 | 462,604 | 479,988 | 509,030 | 512,313 | 512,935 | 508,326 | 467,452 | 427,635 | 368,753 | 302,562 | 238,504 | 193,064 | 113,320 | 109,907 | 114,260 |
| Interest expense (ttm) | US$ in thousands | 89,080 | 88,000 | 84,515 | 79,560 | 76,261 | 75,424 | 72,783 | 70,096 | 65,843 | 61,926 | 60,412 | 59,101 | 58,097 | 56,556 | 54,581 | 53,362 | 53,786 | 56,468 | 59,488 | 63,522 |
| Interest coverage | 2.27 | 3.41 | 4.51 | 5.17 | 5.82 | 6.13 | 6.59 | 7.26 | 7.78 | 8.28 | 8.41 | 7.91 | 7.36 | 6.52 | 5.54 | 4.47 | 3.59 | 2.01 | 1.85 | 1.80 |
April 30, 2025 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $202,494K ÷ $89,080K
= 2.27
The interest coverage ratio for GMS Inc demonstrates a pattern of initial improvement followed by a gradual decline over the observed period. Starting in July 2020 at 1.80, the ratio exhibits a steady upward trajectory, reaching a peak of approximately 8.41 in October 2022. This rise suggests a strengthening of the company's ability to cover its interest expenses, potentially reflecting improved earnings before interest and taxes (EBIT) and/or reduced interest obligations during this period.
From October 2022 onward, the ratio begins a consistent downward trend. By January 2023, it declines marginally to 8.28, and further decreases are observed through subsequent quarters, reaching 6.59 in October 2023. This decline indicates a gradual reduction in the company's capacity to comfortably meet its interest payments solely from its earnings, albeit remaining above generally critical lower thresholds.
The trend continues into early 2024, with the ratio falling to approximately 5.82 by April 2024 and further to 5.17 in July 2024. By October 2024, the ratio diminishes to 4.51, reflecting a weakening interest coverage. The most recent data points in early 2025 reveal a further decline to 3.41 in January and 2.27 in April 2025, signaling a notably reduced margin of safety for interest obligations.
Overall, the company's interest coverage ratio has exhibited a significant rise during the first two years, indicating improved earnings relative to interest expenses. However, the subsequent declining trend raises concerns regarding the ongoing ability to generate sufficient earnings to cover interest payments comfortably. This downward movement warrants attention, as it may point to deteriorating profitability or increasing interest burdens, which could impact the company's financial stability if the trend persists.
Peer comparison
Apr 30, 2025