Royal Gold Inc (RGLD)
Interest coverage
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Jun 30, 2021 | Jun 30, 2020 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 429,899 | 303,202 | 283,709 | 337,602 | 198,945 |
| Interest expense | US$ in thousands | 9,749 | 30,867 | 17,170 | 1,148 | 1,136 |
| Interest coverage | 44.10 | 9.82 | 16.52 | 294.08 | 175.13 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $429,899K ÷ $9,749K
= 44.10
Royal Gold Inc's interest coverage ratio has shown significant fluctuation over the past few years. In June 30, 2020, the company had a solid interest coverage ratio of 175.13, indicating that it was comfortably able to cover its interest expenses. This ratio improved even further by June 30, 2021, reaching 294.08, showcasing the company's robust ability to pay off its interest obligations.
However, there was a sharp decline in the interest coverage ratio by December 31, 2022, dropping to 16.52. This significant decrease may raise concerns about the company's ability to meet its interest payments using its operating income alone. The ratio further decreased to 9.82 by December 31, 2023, indicating a potential strain on Royal Gold Inc's financial position in terms of covering interest expenses.
The company's interest coverage ratio improved again by December 31, 2024, rising to 44.10. While this increase shows a positive trend in the company's ability to cover interest costs, the fluctuations in the ratio over the years highlight the importance of closely monitoring Royal Gold Inc's financial performance and liquidity position.