Neogen Corporation (NEOG)

Interest coverage

		Feb 28, 2025	Nov 30, 2024	Aug 31, 2024	May 31, 2024	Feb 29, 2024	Nov 30, 2023	Aug 31, 2023	May 31, 2023	Feb 28, 2023	Nov 30, 2022	Aug 31, 2022	May 31, 2022	Feb 28, 2022	Nov 30, 2021	Aug 31, 2021	May 31, 2021	Feb 28, 2021	Nov 30, 2020	Aug 31, 2020	May 31, 2020
Earnings before interest and tax (EBIT) (ttm)	US$ in thousands	-434,409	-430,396	46,887	64,236	140,019	143,680	111,084	110,523	39,959	30,652	65,967	67,918	70,146	79,543	77,019	74,169	73,858	71,127	70,154	67,523
Interest expense (ttm)	US$ in thousands	73,114	73,662	73,553	73,394	72,727	71,902	74,415	56,928	39,500	22,354	1,809	840	357	337	892	1,614	3,182	4,488	5,204	5,992
Interest coverage		-5.94	-5.84	0.64	0.88	1.93	2.00	1.49	1.94	1.01	1.37	36.47	80.85	196.49	236.03	86.34	45.95	23.21	15.85	13.48	11.27

February 28, 2025 calculation

Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $-434,409K ÷ $73,114K
= -5.94

Neogen Corporation's interest coverage ratio has shown significant fluctuation over the periods indicated in the data. The interest coverage ratio measures the company's ability to meet its interest obligations with its earnings before interest and taxes (EBIT).

From May 31, 2020, to August 31, 2021, Neogen's interest coverage ratio steadily increased from 11.27 to 86.34, indicating a strong ability to cover interest expenses with its earnings. This upward trend continued until November 30, 2021, when the ratio peaked at 236.03, reflecting a robust financial position.

However, from February 28, 2022, onwards, the interest coverage ratio started to decline sharply, reaching negative values by August 31, 2024. A negative interest coverage ratio implies that the company's earnings are insufficient to cover its interest expenses, raising concerns about its financial viability and ability to meet debt obligations.

The decreasing trend in Neogen Corporation's interest coverage ratio after August 31, 2021, suggests potential financial challenges that may require attention from management. It is crucial for the company to closely monitor its financial performance and liquidity position to ensure its ability to service its debt and maintain financial stability.