HealthEquity Inc (HQY)

Interest coverage

		Jan 31, 2025	Oct 31, 2024	Jul 31, 2024	Apr 30, 2024	Jan 31, 2024	Oct 31, 2023	Jul 31, 2023	Apr 30, 2023	Jan 31, 2023	Oct 31, 2022	Jul 31, 2022	Apr 30, 2022	Jan 31, 2022	Oct 31, 2021	Jul 31, 2021	Apr 30, 2021	Jan 31, 2021	Oct 31, 2020	Jul 31, 2020	Apr 30, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	165,738	166,946	181,953	150,520	130,495	101,450	72,803	42,927	10,328	-37,002	-40,231	-38,382	-30,169	8,277	16,602	25,337	39,021	47,402	15,294	30,893
Interest expense (ttm)	US$ in thousands	60,634	59,018	54,408	52,253	55,455	56,119	54,739	52,960	48,424	44,867	44,583	40,344	36,572	32,595	27,666	29,307	34,881	42,527	45,800	36,972
Interest coverage		2.73	2.83	3.34	2.88	2.35	1.81	1.33	0.81	0.21	-0.82	-0.90	-0.95	-0.82	0.25	0.60	0.86	1.12	1.11	0.33	0.84

January 31, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $165,738K ÷ $60,634K
= 2.73

The interest coverage ratio of HealthEquity Inc shows the company's ability to pay its interest expenses on outstanding debt, by comparing its earnings before interest and taxes (EBIT) to its interest expenses. A higher ratio indicates a stronger ability to meet interest obligations.

Looking at the data provided, the interest coverage ratio fluctuated over the period analyzed. From April 2020 to January 2022, the ratio was consistently below 1, indicating that HealthEquity had difficulties covering its interest expenses with its earnings during this time.

However, from January 2023 onwards, the interest coverage ratio started to increase significantly, reaching levels above 1. This suggests that the company's earnings were sufficient to cover its interest expenses, demonstrating an improvement in its financial health and debt-servicing capabilities.

Overall, the increase in the interest coverage ratio from January 2023 onwards indicates a positive trend in HealthEquity's ability to meet its interest obligations and suggests a strengthening financial position in terms of debt repayment capacity. It would be important to monitor future trends in the interest coverage ratio to assess the company's ongoing ability to service its debt.