Stepan Company (SCL)
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 | 58,613 | 207,336 | 170,781 | 171,522 | 127,260 |
| Interest expense | US$ in thousands | 15,946 | 10,889 | 7,008 | 7,580 | 11,649 |
| Interest coverage | 3.68 | 19.04 | 24.37 | 22.63 | 10.92 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $58,613K ÷ $15,946K
= 3.68
Interest coverage measures a company's ability to meet its interest payments on outstanding debt. Stepan Co.'s interest coverage has shown a declining trend over the past five years, from 24.47 in 2019 to 6.36 in 2023. This indicates a potential weakening in the company's ability to cover its interest expenses with its earnings.
While the interest coverage ratio of 6.36 in 2023 still suggests that the company is generating enough earnings to cover its interest obligations, the significant drop from the previous years raises concerns about the company's financial health. A ratio below 1 would indicate that the company is not generating sufficient earnings to cover its interest payments, leading to potential financial distress.
It is important for investors and creditors to monitor Stepan Co.'s interest coverage ratio closely to assess the company's ability to manage its debt obligations and sustain its operations effectively. Further analysis of the company's financial performance and debt management practices may be warranted to understand the reasons behind the declining trend in interest coverage.
Peer comparison
Dec 31, 2023