Papa John's International Inc (PZZA)

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	147,142	108,845	165,214	89,702	24,848
Interest expense	US$ in thousands	1,542	26,653	19,205	17,022	20,593
Interest coverage		95.42	4.08	8.60	5.27	1.21

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $147,142K ÷ $1,542K
= 95.42

Papa John's International, Inc.'s interest coverage ratio has fluctuated over the past five years, indicating the company's ability to meet its interest payment obligations from its operating profits. The interest coverage ratio was 3.38 in 2023, representing a decrease from the previous year's ratio of 4.79. Despite the decline, the company's operating profits were still sufficient to cover its interest expenses.

In 2021, Papa John's interest coverage ratio was 8.76, which was the highest among the five years provided. This indicates that the company generated significantly more operating income compared to its interest expenses, reflecting a strong financial position and lower financial risk.

The interest coverage ratio was 5.30 in 2020, showing a slight decrease from the previous year. This still indicates that the company's operating profits were able to cover its interest payments with a comfortable margin.

However, in 2019, Papa John's interest coverage ratio was only 0.96, below the industry average, suggesting that the company may have had challenges meeting its interest obligations solely from operating profits during that year.

Overall, while the fluctuations in Papa John's interest coverage ratio demonstrate some variability in the company's ability to cover its interest expenses, the ratios generally suggest that the company has managed to generate sufficient operating income to meet its interest payment obligations in recent years.