MP Materials Corp (MP)
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 | -70,337 | 38,329 | 346,938 | 169,099 | -34,452 |
| Interest expense | US$ in thousands | 23,010 | 5,580 | 5,786 | 8,904 | 5,009 |
| Interest coverage | -3.06 | 6.87 | 59.96 | 18.99 | -6.88 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $-70,337K ÷ $23,010K
= -3.06
Interest coverage is a key financial ratio that measures a company's ability to pay its interest expenses on outstanding debt. A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations.
Analyzing the interest coverage of MP Materials Corp over the given period, we observe fluctuations in the ratio. In December 31, 2020, the interest coverage ratio was -6.88, indicating that the company's operating income was insufficient to cover its interest expenses. However, there was a significant improvement by December 31, 2021, where the ratio increased to 18.99, showing a healthier financial position. This positive trend continued in December 31, 2022, with a notably higher ratio of 59.96, reflecting strong earnings relative to interest costs.
Subsequently, the interest coverage ratio dropped to 6.87 by December 31, 2023, suggesting a reduced capacity to cover interest payments compared to the previous year. Furthermore, in December 31, 2024, the ratio declined further to -3.06, indicating a concerning situation where the company's earnings were insufficient to cover its interest expenses.
Overall, while there were fluctuations in the interest coverage ratio of MP Materials Corp over the period analyzed, it is crucial for the company to maintain a sustainable and positive ratio to ensure its ability to meet interest obligations and sustain profitability in the long term.
Peer comparison
Dec 31, 2024