Paycom Soft (PAYC)

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	652,400	450,779	245,025	149,095	185,955
Interest expense	US$ in thousands	3,400	1,927	2,536	2,395	19
Interest coverage		191.88	233.93	96.62	62.25	9,787.11

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $652,400K ÷ $3,400K
= 191.88

The interest coverage ratio measures a company's ability to cover its interest expenses with its operating income. Looking at the data provided for Paycom Soft over the years, we observe a significant upward trend in the interest coverage ratio.

Specifically, from an extremely high 9,787.11 in December 31, 2020, the ratio decreased substantially to 62.25 in December 31, 2021. However, in the subsequent years, there is a consistent improvement in the interest coverage, with ratios of 96.62, 233.93, and 191.88 for December 31, 2022, 2023, and 2024 respectively.

The drastic decrease in 2021 may raise concerns, indicating a potential strain on the company's ability to cover its interest expenses. However, the subsequent years show a remarkable recovery and growth in the interest coverage ratio, suggesting improved financial health and better capacity to meet interest obligations. It is essential for investors and stakeholders to monitor this ratio to assess the company's ability to service its debt going forward.