Masimo Corporation (MASI)

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	-266,700	138,400	210,000	274,739	264,002
Interest expense	US$ in thousands	1,900	50,300	25,700	300	300
Interest coverage		-140.37	2.75	8.17	915.80	880.01

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $-266,700K ÷ $1,900K
= -140.37

The interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A higher ratio indicates a stronger ability to cover interest expenses.

For Masimo Corporation, the interest coverage ratio has fluctuated significantly over the years. In 2020 and 2021, the company showcased extremely robust interest coverage with ratios of 880.01 and 915.80, respectively, indicating a very comfortable position in meeting interest payments.

However, there was a notable decline in the interest coverage ratio in 2022 to 8.17, significantly lower than the earlier years. This suggests potential challenges in covering interest expenses with operating income during this period.

The situation worsened in 2023 with a further decrease in the interest coverage ratio to 2.75, indicating a potential strain on the company's ability to cover interest payments with operating earnings.

Moreover, in 2024, the interest coverage ratio turned negative to -140.37, which is a concerning sign as it implies that the company's operating income may not be sufficient to cover its interest expenses. This raises questions about the company's financial stability and its ability to service its debt obligations.

In summary, Masimo Corporation's interest coverage ratio has shown significant fluctuations over the years, with a sharp decline in recent years. Investors and lenders may need to closely monitor the company's financial health and ability to meet its interest obligations in the future.