Palo Alto Networks Inc (PANW)

Interest coverage

		Jul 31, 2024	Jul 31, 2023	Jul 31, 2022	Jul 31, 2021	Jul 31, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	996,600	593,500	-179,800	-301,700	-143,100
Interest expense	US$ in thousands	8,300	27,200	27,400	163,300	88,700
Interest coverage		120.07	21.82	-6.56	-1.85	-1.61

July 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $996,600K ÷ $8,300K
= 120.07

Palo Alto Networks Inc has exhibited varying levels of interest coverage over the past five years. The interest coverage ratio serves as an indicator of a company's ability to pay its interest expenses with its operating income.

In July 2024, the interest coverage ratio was 120.07, reflecting a substantial improvement compared to the previous years. This high ratio suggests that the company's operating income is more than sufficient to cover its interest expenses, indicating strong financial health and a lower risk of default on debt obligations.

Conversely, in the preceding years, the interest coverage ratios were significantly lower. In July 2023, the ratio was 21.82, while in July 2022, it was a negative figure (-6.56), indicating that the company's operating income was insufficient to cover its interest expenses during those periods. This raises concerns about the company's ability to meet its interest obligations from its operating earnings alone.

Moreover, in July 2021 and 2020, the interest coverage ratios were also negative at -1.85 and -1.61, respectively, highlighting a consistent inability to cover interest expenses with operating income during these years.

Overall, the significant improvement in interest coverage in July 2024 suggests a positive trend towards better financial performance and debt servicing capabilities for Palo Alto Networks Inc. However, the company's past challenges in meeting interest obligations underscore the importance of closely monitoring its financial health and debt management practices moving forward.