Neogen Corporation (NEOG)

Interest coverage

		May 31, 2025	May 31, 2024	May 31, 2023	May 31, 2022	May 31, 2021
Earnings before interest and tax (EBIT)	US$ in thousands	—	61,370	37,515	84,199	77,254
Interest expense	US$ in thousands	68,512	73,394	55,961	72	78
Interest coverage		0.00	0.84	0.67	1,169.43	990.44

May 31, 2025 calculation

Interest coverage = EBIT ÷ Interest expense
= $—K ÷ $68,512K
= 0.00

The interest coverage ratio of Neogen Corporation demonstrates significant fluctuations over the reported periods. As of May 31, 2021, the interest coverage was exceptionally high at 990.44, indicating that the company's earnings before interest and taxes (EBIT) comfortably exceeded its interest expenses, reflecting a very strong capacity to service debt. This high ratio persisted and increased further by May 31, 2022, reaching 1,169.43, which suggests an even stronger margin of safety in meeting interest obligations.

However, a substantial decline is observed by May 31, 2023, where the interest coverage drops dramatically to 0.67. This indicates that the company's EBIT fell below its interest expenses, implying that Neogen was likely experiencing a period where its earnings were insufficient to cover interest payments, raising concerns regarding its debt servicing ability. This deterioration points to potential financial stress or operational challenges during that period.

The trend shows a modest improvement by May 31, 2024, with the ratio increasing to 0.84, but it still remains below 1.0. This suggests that although the company's earnings improved relative to its interest expenses, it continued to struggle with fully covering its interest obligations without relying on other sources of income or adjustments.

By May 31, 2025, the interest coverage ratio reaches zero, reflecting that the company either did not generate earnings before interest and taxes or possibly ceased interest payments altogether within that period. This could correspond with a scenario such as a significant operational downturn, restructuring, or other extraordinary circumstances affecting profitability and interest obligations.

Overall, the trend indicates a stark decline from extremely high interest coverage levels in 2021 and 2022 to critically low or nonexistent coverage in subsequent years, highlighting increased financial risk and potential concerns for debt sustainability.