Granite Construction Incorporated (GVA)
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 | 225,380 | 78,316 | 70,964 | -41,721 | -93,005 |
| Interest expense | US$ in thousands | 29,188 | 18,462 | 12,624 | 20,282 | 24,200 |
| Interest coverage | 7.72 | 4.24 | 5.62 | -2.06 | -3.84 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $225,380K ÷ $29,188K
= 7.72
Granite Construction Incorporated's interest coverage ratio has shown fluctuations over the past five years. As of December 31, 2020 and December 31, 2021, the company's interest coverage ratio was negative, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expense. This suggests a potential risk in meeting its interest obligations with its current earnings.
However, there was a significant improvement in the interest coverage ratio in subsequent years. By December 31, 2022, the ratio increased to 5.62, and continued to improve to 4.24 by December 31, 2023, and further to 7.72 by December 31, 2024. These positive trends indicate that Granite Construction Incorporated's ability to cover its interest payments with its EBIT has strengthened over time.
Overall, the recent increase in the interest coverage ratio reflects a positive development for the company, suggesting an improved financial health and a reduced risk of defaulting on its interest payments. It indicates that the company's earnings are more than sufficient to cover its interest expenses, which is typically viewed favorably by investors and creditors.
Peer comparison
Dec 31, 2024