Paychex Inc (PAYX)
Interest coverage
| May 31, 2025 | 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 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 1,828,300 | 2,310,100 | 2,251,500 | 2,204,500 | 2,174,100 | 2,145,600 | 2,107,700 | 2,085,900 | 2,045,200 | 1,985,900 | 1,936,800 | 1,899,300 | 1,846,600 | 1,806,400 | 1,712,200 | 1,619,600 | 1,485,100 | 1,430,900 | 1,432,400 | 1,419,800 |
| Interest expense (ttm) | US$ in thousands | 105,400 | 51,200 | 38,500 | 37,500 | 37,300 | 37,200 | 36,300 | 37,000 | 36,700 | 36,400 | 36,400 | 36,500 | 36,600 | 36,500 | 36,300 | 36,000 | 35,800 | 35,900 | 36,400 | 37,500 |
| Interest coverage | 17.35 | 45.12 | 58.48 | 58.79 | 58.29 | 57.68 | 58.06 | 56.38 | 55.73 | 54.56 | 53.21 | 52.04 | 50.45 | 49.49 | 47.17 | 44.99 | 41.48 | 39.86 | 39.35 | 37.86 |
May 31, 2025 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $1,828,300K ÷ $105,400K
= 17.35
The analysis of Paychex Inc.'s interest coverage ratio reveals a consistently strong capacity to meet its interest obligations over the examined period. Starting from August 31, 2020, with a ratio of 37.86, the interest coverage has shown a steady upward trend, reaching a peak of approximately 58.79 as of August 31, 2024. This indicates that the company's operating earnings before interest and taxes (EBIT) significantly exceeded its interest expenses, reflecting robust financial health and low default risk during this timeframe.
Throughout the period, the ratio demonstrates a sustained period of improvement, suggesting enhanced profitability or effective management of interest-bearing liabilities. The progressively rising trend until late 2024 signifies a strengthening of Paychex's capacity to service its debt, which is typically viewed positively by creditors and investors.
However, a notable decline appears in the latest data, with the ratio decreasing sharply to 45.12 as of February 29, 2025. This represents a substantial reduction from previous levels and indicates a potential weakening in the company's ability to cover interest expenses fully, possibly due to a decline in operating profits or an increase in interest obligations.
Despite this recent decrease, the interest coverage remains above 17 at the most recent point on May 31, 2025 (17.35), still indicating a generally healthy margin of safety. Overall, the trend portrays a company that has historically possessed a strong capacity to meet its interest obligations but is experiencing some challenges or changes that have impacted this ability in the near term.