MGE Energy Inc (MGEE)
Interest coverage
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | Sep 30, 2021 | Jun 30, 2021 | Mar 31, 2021 | Dec 31, 2020 | Sep 30, 2020 | Jun 30, 2020 | Mar 31, 2020 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 146,262 | 142,789 | 138,441 | 147,096 | 146,385 | 150,151 | 148,846 | 135,914 | 137,743 | 127,057 | 122,168 | 120,103 | 117,294 | 118,757 | 119,484 | 117,611 | 109,997 | 113,162 | 113,575 | 111,838 |
| Interest expense (ttm) | US$ in thousands | 32,930 | 32,253 | 31,511 | 30,946 | 30,429 | 29,862 | 28,860 | 27,563 | 26,647 | 26,207 | 25,634 | 24,942 | 24,111 | 23,371 | 23,057 | 23,200 | 23,521 | 17,935 | 12,369 | 12,204 |
| Interest coverage | 4.44 | 4.43 | 4.39 | 4.75 | 4.81 | 5.03 | 5.16 | 4.93 | 5.17 | 4.85 | 4.77 | 4.82 | 4.86 | 5.08 | 5.18 | 5.07 | 4.68 | 6.31 | 9.18 | 9.16 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $146,262K ÷ $32,930K
= 4.44
Interest coverage is a financial ratio that indicates a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing the earnings before interest and taxes (EBIT) by the interest expense.
Analyzing the interest coverage ratios of MGE Energy Inc over the past few years, we observe a gradual decline in the ratio from 9.16 on March 31, 2020, to 4.44 on December 31, 2024. This downward trend indicates that the company's ability to cover its interest expenses has weakened over time.
A ratio above 1 indicates that the company is generating enough earnings to cover its interest payments. MGE Energy Inc has consistently maintained its interest coverage above 1 throughout the period, indicating that the company has been able to meet its interest obligations.
However, a higher interest coverage ratio is generally preferred as it signifies a stronger financial position and lower risk of default. MGE Energy Inc may need to closely monitor its interest coverage ratio to ensure it remains at a healthy level to satisfy creditors and maintain financial stability.