Papa John's International Inc (PZZA)

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	156,704	148,415	109,030	168,241	87,316
Interest expense	US$ in thousands	42,578	43,469	25,261	19,205	17,022
Interest coverage		3.68	3.41	4.32	8.76	5.13

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $156,704K ÷ $42,578K
= 3.68

Based on the interest coverage ratios of Papa John's International Inc from 2020 to 2024, we observe fluctuations in the company's ability to cover its interest expenses.

The interest coverage ratio reflects the company's ability to meet its interest payments from its operating income. A higher ratio indicates a stronger ability to cover interest expenses.

In 2020, the interest coverage ratio was 5.13, suggesting that the company's operating income was 5.13 times the amount of its interest expense. This indicates a reasonable level of coverage.

The ratio improved in 2021 to 8.76, showcasing a significant increase in the company's ability to cover its interest obligations. This may reflect improved profitability or lower interest expenses.

However, there was a notable decline in the interest coverage ratio in 2022 to 4.32 and further decreased in 2023 to 3.41. These lower ratios may raise concerns about the company's ability to comfortably meet its interest payments from operating income.

In 2024, the ratio slightly increased to 3.68, but it remained relatively low compared to the previous years. This suggests that Papa John's International Inc may be experiencing some challenges in generating enough operating income to cover its interest expenses efficiently.

Overall, fluctuations in the interest coverage ratio of Papa John's International Inc over the years indicate varying levels of financial strength and the need for careful monitoring of the company's ability to manage its interest obligations effectively.