Enpro Industries (NPO)
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 | 135,300 | 82,700 | 63,900 | 82,200 | -10,300 |
| Interest expense | US$ in thousands | 40,900 | 45,000 | 35,600 | 16,300 | 16,500 |
| Interest coverage | 3.31 | 1.84 | 1.79 | 5.04 | -0.62 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $135,300K ÷ $40,900K
= 3.31
Interest coverage ratio is a key financial metric used to evaluate a company's ability to cover its interest expenses with its operating income. A ratio below 1 indicates that the company's operating income is insufficient to cover its interest expenses, which may raise concerns about the company's financial stability and ability to meet its debt obligations.
Based on the provided data for Enpro Industries, the interest coverage ratios for the years ending on December 31, 2020, 2021, 2022, 2023, and 2024 are -0.62, 5.04, 1.79, 1.84, and 3.31, respectively.
The interest coverage ratio for December 31, 2020, of -0.62 is concerning as it indicates that the company's operating income was not sufficient to cover its interest expenses. However, the ratios for the subsequent years showed improvement, with the ratio exceeding 1 in the following years.
It is important to note that while the ratios for the later years improved, they still indicate that the company may have had some challenges in covering its interest expenses comfortably. A higher interest coverage ratio, ideally above 2, is typically considered more favorable as it suggests a company has a healthier financial position and can easily meet its interest obligations.
Further analysis and monitoring of Enpro Industries' interest coverage ratio trends over time would be beneficial to assess the company's financial health and debt servicing capabilities.