Lumentum Holdings Inc (LITE)
Interest coverage
| Jun 30, 2024 | Jun 30, 2023 | Jun 30, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | -434,000 | -66,900 | 315,300 | 529,800 | 235,500 |
| Interest expense | US$ in thousands | 14,600 | 35,500 | 80,200 | 66,700 | 61,200 |
| Interest coverage | -29.73 | -1.88 | 3.93 | 7.94 | 3.85 |
June 30, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $-434,000K ÷ $14,600K
= -29.73
Lumentum Holdings Inc's interest coverage ratio has shown significant variability over the past five years. In particular, the interest coverage ratio was notably weak in the most recent period, standing at -29.73, indicating that the company's operating income was insufficient to cover its interest expenses. This sharp decline from the previous year's ratio of -1.88 raises concerns about the company's ability to meet its interest obligations.
Looking at the trend over the five-year period, Lumentum's interest coverage ratio has been inconsistent. In 2022, the ratio improved to 3.93, reflecting a more favorable position compared to the preceding year. However, this improvement was not sustained, as evidenced by the decline in the ratio in 2023 and the substantial deterioration in 2024.
The company's interest coverage ratio was relatively strong in 2021 and 2020, standing at 7.94 and 3.85, respectively. These ratios indicated that Lumentum had sufficient operating income to cover its interest expenses during those years.
In conclusion, the recent negative trend in Lumentum Holdings Inc's interest coverage ratio warrants attention, as it suggests potential challenges in meeting interest obligations. Management should focus on improving the company's profitability and cash flow generation to ensure adequate coverage of its interest expenses in the future.
Peer comparison
Jun 30, 2024