CarMax Inc (KMX)

Interest coverage

		Feb 28, 2025	Nov 30, 2024	Aug 31, 2024	May 31, 2024	Feb 29, 2024	Nov 30, 2023	Aug 31, 2023	May 31, 2023	Feb 28, 2023	Nov 30, 2022	Aug 31, 2022	May 31, 2022	Feb 28, 2022	Nov 30, 2021	Aug 31, 2021	May 31, 2021	Feb 28, 2021	Nov 30, 2020	Aug 31, 2020	May 31, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	1,161,636	922,037	677,884	663,541	702,315	716,732	744,738	753,778	844,062	960,795	1,141,422	1,341,583	1,536,388	1,581,828	1,561,336	1,574,024	1,002,860	1,029,361	943,115	860,738
Interest expense (ttm)	US$ in thousands	890,441	877,635	860,482	804,046	763,450	697,044	633,229	544,889	449,398	386,118	326,371	314,136	257,095	201,736	220,395	241,154	244,578	246,596	262,277	270,181
Interest coverage		1.30	1.05	0.79	0.83	0.92	1.03	1.18	1.38	1.88	2.49	3.50	4.27	5.98	7.84	7.08	6.53	4.10	4.17	3.60	3.19

February 28, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,161,636K ÷ $890,441K
= 1.30

Interest coverage ratio measures a company's ability to meet its interest payments on outstanding debt. A higher ratio indicates a greater ability to cover interest expenses. CarMax Inc's interest coverage has shown fluctuations over the periods provided.

From May 31, 2020, to May 31, 2021, CarMax's interest coverage improved steadily from 3.19 to 6.53, indicating an enhanced ability to cover interest expenses. The ratio peaked on November 30, 2021, at 7.84, reflecting strong operational performance and higher earnings relative to interest costs.

However, starting from February 28, 2022, the interest coverage ratio began to decline, reaching 0.83 by May 31, 2024. This declining trend suggests that CarMax may be facing challenges in generating sufficient earnings to cover its interest obligations, potentially signaling financial distress.

It's essential for investors and stakeholders to closely monitor CarMax's interest coverage ratio over time to assess the company's financial health and ability to manage its debt obligations effectively. A sustained low interest coverage ratio may raise concerns about CarMax's financial stability and ability to service its debt in the long term.