Sonic Automotive Inc (SAH)

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	461,500	423,600	314,000	538,400	33,900
Interest expense	US$ in thousands	8,400	141,700	109,800	60,500	50,704
Interest coverage		54.94	2.99	2.86	8.90	0.67

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $461,500K ÷ $8,400K
= 54.94

Sonic Automotive Inc's interest coverage ratio has shown significant fluctuations over the past few years. As of December 31, 2020, the interest coverage ratio was low at 0.67, indicating that the company's operating income was only sufficient to cover 67% of its interest expenses.

However, there was a substantial improvement in the interest coverage ratio by the end of December 31, 2021, reaching 8.90. This sharp increase suggests that Sonic Automotive Inc's operating income significantly improved, providing nearly 9 times coverage for its interest obligations.

In the subsequent years, the interest coverage ratio remained above 2, indicating that Sonic Automotive Inc's earnings were sufficient to cover its interest expenses, although not to the same extent as in 2021. By December 31, 2024, the interest coverage ratio spiked to 54.94, which is remarkably high and suggests the company's strong ability to meet its interest payments with its operating income.

Overall, Sonic Automotive Inc's interest coverage ratio has shown both volatility and improvement across the years, with particularly significant growth in 2021 and a remarkable increase by 2024, indicating a positive trend in the company's financial health and ability to cover its interest obligations. It is essential for investors and stakeholders to monitor this ratio in the future to assess the company's ability to manage its debt and financial risk effectively.