CarMax Inc (KMX)

Interest coverage

		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	Feb 29, 2020	Nov 30, 2019	Aug 31, 2019	May 31, 2019
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	766,345	780,762	719,082	729,531	757,202	873,935	1,174,056	1,363,960	1,586,441	1,640,884	1,590,585	1,611,171	1,051,435	1,067,837	987,274	903,074	1,243,993	1,221,858	1,239,078	1,219,903
Interest expense (ttm)	US$ in thousands	124,750	122,044	120,929	122,089	120,398	118,518	112,671	102,336	94,095	87,536	82,695	82,754	86,178	88,196	90,577	89,181	83,007	81,676	78,647	75,524
Interest coverage		6.14	6.40	5.95	5.98	6.29	7.37	10.42	13.33	16.86	18.75	19.23	19.47	12.20	12.11	10.90	10.13	14.99	14.96	15.75	16.15

February 29, 2024 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $766,345K ÷ $124,750K
= 6.14

Interest coverage ratio measures a company's ability to cover its interest expenses with its operating income. A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations. In the case of CarMax Inc, the interest coverage ratio has exhibited a fluctuating trend over the provided periods.

From November 2019 to February 2022, CarMax Inc's interest coverage ratio showed a steady increase, reaching its peak in February 2022 at 16.86. This suggests that the company's operating income was significantly higher than its interest expenses during this period, demonstrating a strong ability to meet its interest payments.

However, from August 2022 onwards, the interest coverage ratio for CarMax Inc started to decline, indicating a potential decrease in the company's ability to cover its interest expenses efficiently. The ratio dropped to 10.90 in August 2020 before bouncing back to 19.47 in February 2021. Subsequently, the ratio fluctuated between 10.13 and 14.99 until February 2024.

These fluctuations in CarMax Inc's interest coverage ratio may suggest variations in the company's operating income and interest expenses during the mentioned periods. Investors and creditors may closely monitor these trends to assess the company's financial health and its ability to manage its debt obligations effectively.