LGI Homes (LGIH)

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	—	233,255	390,107	547,698	364,710
Interest expense	US$ in thousands	—	87,604	29,585	28,360	3,849
Interest coverage		—	2.66	13.19	19.31	94.75

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $—K ÷ $—K
= —

Interest coverage is a critical financial ratio that indicates a company's ability to meet its interest obligations with its operating income. For LGI Homes, the interest coverage has declined over the years based on the given data. In December 31, 2020, the interest coverage was strong at 94.75, implying that the company's operating income was 94.75 times higher than its interest expense, indicating a robust ability to cover interest payments.

However, there has been a significant decrease in interest coverage over the subsequent years. By December 31, 2021, the interest coverage had dropped to 19.31, showing a reduction in LGI Homes' ability to cover interest costs. This downward trend continued as the interest coverage decreased to 13.19 by December 31, 2022, and further declined to 2.66 by December 31, 2023, indicating a significant strain on its ability to service its debt with operating income.

The absence of a value for December 31, 2024, is noted, suggesting a potential inability to cover interest expenses adequately. The declining trend in interest coverage raises concerns about LGI Homes' financial stability and ability to meet its interest obligations in the future. This trend warrants further analysis and monitoring to assess the company's financial health and risk of default.