Hilton Grand Vacations Inc (HGV)
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 | 627,000 | 623,000 | 374,000 | -237,000 | 316,000 |
| Interest expense | US$ in thousands | 178,000 | 142,000 | 105,000 | 43,000 | 43,000 |
| Interest coverage | 3.52 | 4.39 | 3.56 | -5.51 | 7.35 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $627,000K ÷ $178,000K
= 3.52
Interest coverage ratio is a financial metric used to evaluate a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense. A higher interest coverage ratio indicates that the company has more earnings to cover its interest expenses.
In the case of Hilton Grand Vacations Inc, the interest coverage ratio has fluctuated over the past five years. In 2023, the interest coverage ratio was 3.91, which indicates that the company generates enough earnings to cover its interest expenses nearly four times. This represents a slight decrease from 2022 when the ratio was 4.99.
Looking further back, the interest coverage ratio was 4.84 in 2021, showing a relatively consistent performance in covering interest expenses. However, in 2020, the ratio was negative at -0.72, indicating that the company's earnings were not sufficient to cover its interest payments during that year. This could be a cause for concern as negative interest coverage implies financial distress.
On a positive note, in 2019, Hilton Grand Vacations Inc had a strong interest coverage ratio of 7.42, indicating a healthy ability to meet its interest obligations. The fluctuation in the interest coverage ratio over the years suggests varying financial performance and efficiency in managing debt obligations. Investors and stakeholders should monitor this ratio closely to assess the company's financial health and ability to service its debt in the future.