Neogen Corporation (NEOG)

Interest coverage

		May 31, 2024	May 31, 2023	May 31, 2022	May 31, 2021	May 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	61,370	37,515	84,199	77,254	67,523
Interest expense	US$ in thousands	73,394	55,961	1,267	78	23,178
Interest coverage		0.84	0.67	66.46	990.44	2.91

May 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $61,370K ÷ $73,394K
= 0.84

Neogen Corporation's interest coverage ratio has shown significant fluctuations over the past five years. As of May 31, 2020, the interest coverage ratio was 2.91, indicating that the company's operating income was able to cover its interest expenses nearly three times. This suggests a moderate level of financial health in terms of its ability to meet interest obligations.

In the following year, as of May 31, 2021, the interest coverage ratio skyrocketed to 990.44, reflecting a substantial increase in the company's operating income relative to its interest expenses. This exceptionally high ratio indicates a very strong ability to cover interest payments, which may be attributed to improved operational efficiency or significant increases in revenue.

However, by May 31, 2022, the interest coverage ratio decreased to 66.46, still indicating a robust ability to cover interest expenses, albeit at a lower level compared to the previous year. This decline could be due to various factors such as changes in interest rates, fluctuations in revenue, or alterations in the company's capital structure.

Subsequently, as of May 31, 2023, the interest coverage ratio dropped to 0.67, signaling a concerning decline in Neogen Corporation's ability to cover interest expenses with its operating income. A ratio below 1 indicates that the company's earnings are insufficient to cover its interest payments, raising red flags about its financial health and solvency.

Finally, as of May 31, 2024, the interest coverage ratio slightly improved to 0.84. While this uptick suggests a marginal enhancement in the company's ability to cover interest expenses, the ratio still remains below 1, indicating ongoing challenges in meeting debt obligations from operating profits.

In conclusion, Neogen Corporation's interest coverage ratio has exhibited fluctuations, ranging from a moderate level of coverage to exceptionally strong coverage to concerning levels of insufficiency. It is essential for stakeholders to monitor these trends closely to assess the company's financial stability and ability to service its debt obligations effectively.