Quanex Building Products (NX)
Interest coverage
| Jan 31, 2024 | Oct 31, 2023 | Jul 31, 2023 | Apr 30, 2023 | Jan 31, 2023 | Oct 31, 2022 | Jul 31, 2022 | Apr 30, 2022 | Jan 31, 2022 | Oct 31, 2021 | Jul 31, 2021 | Apr 30, 2021 | Jan 31, 2021 | Oct 31, 2020 | Jul 31, 2020 | Apr 30, 2020 | Jan 31, 2020 | Oct 31, 2019 | Jul 31, 2019 | Apr 30, 2019 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 109,520 | 105,182 | 100,499 | 97,067 | 102,763 | 112,322 | 110,818 | 98,135 | 84,777 | 82,624 | 83,415 | 78,008 | 65,556 | 55,545 | 3,483 | 6,509 | -22,101 | -26,311 | 9,727 | 7,383 |
| Interest expense (ttm) | US$ in thousands | 6,945 | 8,136 | 7,281 | 5,937 | 4,295 | 2,559 | 2,391 | 2,264 | 2,302 | 2,530 | 2,923 | 3,491 | 4,414 | 5,245 | 6,339 | 7,744 | 8,783 | 9,643 | 11,130 | 11,201 |
| Interest coverage | 15.77 | 12.93 | 13.80 | 16.35 | 23.93 | 43.89 | 46.35 | 43.35 | 36.83 | 32.66 | 28.54 | 22.35 | 14.85 | 10.59 | 0.55 | 0.84 | -2.52 | -2.73 | 0.87 | 0.66 |
January 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $109,520K ÷ $6,945K
= 15.77
The interest coverage ratio measures a company's ability to pay its interest expenses on outstanding debt. A higher ratio indicates stronger ability to fulfill these obligations.
In the case of Quanex Building Products, the interest coverage ratio has fluctuated over the periods provided. From January 2020 to October 2021, the ratio was consistently healthy, ranging from 22.35 to 46.35, indicating the company had more than enough operating income to cover its interest expenses comfortably.
However, from January 2022 to October 2023, the interest coverage ratio started to decline, dropping to as low as 10.59 in October 2022. This downward trend suggests that Quanex Building Products may be facing challenges in generating enough income to cover its interest costs.
The sudden drop in interest coverage ratio to 0.55 and then further negative ratios in July 2020 and January 2020 are alarming signs. A ratio below 1 indicates that the company is not generating enough operating income to cover its interest expenses, which could raise concerns about its financial health and ability to service its debt obligations.
Overall, the decreasing trend in interest coverage ratios for Quanex Building Products raises flags about its ability to handle its interest expenses in recent periods and points towards a need for further analysis to understand the underlying reasons behind the decline.
Peer comparison
Jan 31, 2024