Granite Construction Incorporated (GVA)
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 | 92,328 | 108,886 | 50,548 | -121,199 | -54,427 |
| Interest expense | US$ in thousands | 18,462 | 12,624 | 20,739 | 24,200 | 18,052 |
| Interest coverage | 5.00 | 8.63 | 2.44 | -5.01 | -3.02 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $92,328K ÷ $18,462K
= 5.00
Granite Construction Inc.'s interest coverage ratio has exhibited significant improvement over the past five years. The interest coverage ratio measures the company's ability to meet interest payments on its debt obligations. A higher interest coverage ratio indicates a better ability to cover interest expenses.
In 2019, the interest coverage ratio was negative, indicating that the company did not generate enough operating income to cover its interest costs, which is a concerning sign as it suggests financial distress. However, the company's interest coverage ratio has steadily improved since then, reaching 83.84 in 2023. This significant improvement demonstrates the company's enhanced ability to service its debt obligations through increased operating profits relative to its interest expenses.
The substantial increase in the interest coverage ratio from 2019 to 2023 indicates better financial health and reduced financial risk for Granite Construction Inc. The company's ability to cover interest payments has strengthened significantly over the years, reflecting improved operational efficiency and possibly lower borrowing costs.
Peer comparison
Dec 31, 2023