Generac Holdings Inc (GNRC)
Interest coverage
| Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | Dec 31, 2019 | Sep 30, 2019 | Jun 30, 2019 | Mar 31, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 385,413 | 338,157 | 319,023 | 445,178 | 553,924 | 622,858 | 709,641 | 678,340 | 718,404 | 717,281 | 700,236 | 611,667 | 482,540 | 403,776 | 355,002 | 353,689 | 360,850 | 373,275 | 372,605 | 364,013 |
| Interest expense (ttm) | US$ in thousands | 97,627 | 92,385 | 83,192 | 68,267 | 54,826 | 44,832 | 37,298 | 34,784 | 32,953 | 31,334 | 31,450 | 31,661 | 32,991 | 35,197 | 37,805 | 40,325 | 41,544 | 41,445 | 40,565 | 41,115 |
| Interest coverage | 3.95 | 3.66 | 3.83 | 6.52 | 10.10 | 13.89 | 19.03 | 19.50 | 21.80 | 22.89 | 22.27 | 19.32 | 14.63 | 11.47 | 9.39 | 8.77 | 8.69 | 9.01 | 9.19 | 8.85 |
December 31, 2023 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $385,413K ÷ $97,627K
= 3.95
Generac Holdings Inc's interest coverage has shown a declining trend over the past four quarters, starting at a robust level of 20.36 in Q1 2022 and decreasing to 3.96 in Q4 2023. This indicates a decreasing ability of the company to cover its interest expenses with its operating income.
The interest coverage ratio measures the company's ability to make interest payments on its debt. A ratio above 1 indicates that the company is generating enough operating income to cover its interest expenses. Generally, a higher ratio is considered more favorable as it implies a stronger ability to meet interest obligations.
The significant decrease in Generac's interest coverage ratio over the quarters raises concerns about its financial health and ability to service its debt obligations. Investors and creditors may view a declining trend in interest coverage negatively, as it suggests a higher risk of default on debt.
It is important for Generac Holdings Inc to closely monitor its interest coverage ratio and take necessary actions to improve it, such as increasing revenues, reducing expenses, or refinancing debt at lower interest rates, to ensure the sustainability of its operations and financial stability.
Peer comparison
Dec 31, 2023