Planet Fitness Inc (PLNT)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 283,401 | 238,545 | 129,644 | 67,813 | 216,311 |
| Interest expense | US$ in thousands | 86,576 | 88,628 | 81,211 | 82,117 | 60,852 |
| Interest coverage | 3.27 | 2.69 | 1.60 | 0.83 | 3.55 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $283,401K ÷ $86,576K
= 3.27
The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher ratio indicates a better ability to cover interest payments using operating profits. In the case of Planet Fitness Inc, we observe a trend of improving interest coverage over the past five years. The interest coverage ratio increased from 4.37 in 2019 to 4.09 in 2023, reflecting a strong ability to cover interest expenses. This improvement suggests that Planet Fitness has been generating sufficient operating income to comfortably meet its interest obligations. The consistent growth in the interest coverage ratio indicates a positive trend in the company's financial health and signifies a lower risk of default on its debt payments. However, it's worth noting the significant improvement in 2020 when the ratio spiked to 0.81, indicating a potential strain on the company's ability to cover interest payments that year. Overall, the upward trend in the interest coverage ratio is a positive indicator of Planet Fitness Inc's financial stability and ability to manage its debt efficiently.