Scholastic Corporation (SCHL)

The interest coverage ratio for Scholastic Corporation exhibits significant fluctuations over the analyzed period from May 31, 2021, to May 31, 2025.

In the fiscal year ending May 31, 2021, the ratio was negative at -5.32, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses, reflecting a period of financial distress or high leverage. This negative coverage suggests that Scholastic may have faced difficulties generating enough operating profits to meet interest obligations, possibly implying reliance on external financing sources or one-time financial hits.

The following year, ending May 31, 2022, shows a marked improvement with a ratio of 31.93. This substantial increase indicates a significant strengthening in earnings relative to interest expenses, implying that the company was well-positioned to comfortably meet its interest obligations during that period. This substantial rebound could be attributable to increased profitability, cost reductions, or other operational improvements.

In the fiscal year ending May 31, 2023, the ratio further escalated to 81.29, signaling an even stronger ability to cover interest expenses with operational earnings. Such a high ratio suggests that the company's earnings were more than adequate to meet interest commitments, reflecting robust profitability and efficient management.

However, the trend shifts notably in the following years. For May 31, 2024, the ratio declines to 9.53, indicating a considerable reduction in interest coverage but still remaining above 1.0, signifying that earnings continued to exceed interest obligations, although with a narrower margin. This reduction points to potential pressures on earnings or increased interest expenses, which could warrant further investigation into operational or financial changes during this period.

Finally, for the fiscal year ending May 31, 2025, the ratio drops sharply to 0.92, falling below the critical threshold of 1.0. This indicates that operating earnings are barely sufficient to cover interest expenses, raising concerns about the company's ability to sustain interest payments without additional income or restructuring. This trend suggests deteriorating profitability or rising interest burdens, which could pose risks to financial stability if not addressed.

In summary, Scholastic Corporation experienced a volatile interest coverage ratio over the analyzed period, transitioning from negative coverage in 2021 to exceptionally strong coverage in 2023, then declining sharply toward 2025. The recent trend toward an interest coverage ratio below 1.0 warrants close monitoring for potential liquidity and solvency issues.

Peer comparison

May 31, 2025