Insulet Corporation (PODD)

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	250,800	46,300	82,200	57,800	49,100
Interest expense	US$ in thousands	36,200	36,000	61,700	48,100	34,600
Interest coverage		6.93	1.29	1.33	1.20	1.42

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $250,800K ÷ $36,200K
= 6.93

The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt. A higher interest coverage ratio indicates a company is more capable of servicing its debt.

In the case of Insulet Corporation, the interest coverage ratio has shown a fluctuating trend over the past five years. In 2023, the interest coverage ratio significantly improved to 28.95, reflecting a substantial increase compared to the previous year. This sharp increase suggests that Insulet Corporation's earnings before interest and taxes (EBIT) are significantly higher relative to its interest expenses in 2023.

Conversely, in 2022, the interest coverage ratio was relatively low at 1.80, indicating that the company's EBIT barely covered its interest expenses. The ratios for 2021, 2020, and 2019 were also on the lower side at 2.06, 1.14, and 1.45, respectively, suggesting a similar trend of tighter coverage of interest payments by EBIT in those years.

The substantial improvement in the interest coverage ratio for 2023 is a positive signal, indicating that Insulet Corporation's financial performance has strengthened, making it more capable of paying interest expenses. However, consistent monitoring of this ratio in the future will be essential to assess the company's ongoing ability to service its debt obligations.