Kodiak Gas Services, Inc. (KGS)

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	273,052	257,650	309,471	229,683	168,431
Interest expense	US$ in thousands	197,144	222,514	170,114	107,293	113,440
Interest coverage		1.39	1.16	1.82	2.14	1.48

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $273,052K ÷ $197,144K
= 1.39

The interest coverage ratio for Kodiak Gas Services, Inc. demonstrates fluctuations over the analyzed period from December 31, 2020, through December 31, 2024. In 2020, the ratio stood at 1.48, indicating a relatively modest ability to meet interest obligations from operational earnings. The ratio improved significantly in 2021 to 2.14, suggesting an increased capacity to cover interest expenses, which may reflect improved profitability or reduced interest obligations.

However, in 2022, the ratio declined slightly to 1.82, signaling a decrease in coverage but still remaining above the critical threshold of 1.5, which is generally considered to denote acceptable coverage levels. The year 2023 saw a notable decline to 1.16, approaching the lower end of adequacy and highlighting potential concerns regarding the company's ability to comfortably meet its interest commitments solely from operating income. This decline indicates either reduced earnings, increased interest expenses, or both.

In 2024, there was a modest recovery to 1.39; although this number indicates some improvement relative to 2023, it remains below the 1.5 benchmark often viewed as the minimum for satisfactory coverage. The overall trend suggests that the company's ability to cover interest obligations has weakened over the period, with particularly concerning levels in 2023. This pattern may warrant a cautious outlook on the company’s financial stability and its capacity to sustain current debt levels without potential refinancing or operational adjustments.