Hilton Grand Vacations Inc (HGV)
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 | 216,000 | 627,000 | 623,000 | 374,000 | -237,000 |
| Interest expense | US$ in thousands | 93,000 | 178,000 | 142,000 | 105,000 | 43,000 |
| Interest coverage | 2.32 | 3.52 | 4.39 | 3.56 | -5.51 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $216,000K ÷ $93,000K
= 2.32
The interest coverage ratio for Hilton Grand Vacations Inc has shown fluctuations over the years. As of December 31, 2020, the company's interest coverage ratio was -5.51, indicating that the company's operating income was insufficient to cover its interest expenses. However, there has been a significant improvement in the following years. By December 31, 2021, the interest coverage ratio had increased to 3.56, showing a positive trend.
Subsequently, the interest coverage ratio continued to improve, reaching 4.39 by December 31, 2022, and then slightly decreasing to 3.52 by December 31, 2023. The decrease in 2023 could be a point of concern as it indicates a slight decline in the company's ability to cover its interest expenses.
By December 31, 2024, the interest coverage ratio further declined to 2.32, which may raise some red flags regarding the company's ability to meet its interest obligations from its operating earnings. Overall, while there have been fluctuations in the interest coverage ratio for Hilton Grand Vacations Inc, it is essential for the company to ensure a consistent and healthy interest coverage ratio to demonstrate its ability to manage its debt obligations effectively.