Select Medical Holdings (SEM)
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 | 303,374 | 580,995 | 379,483 | 570,074 | 477,645 |
| Interest expense | US$ in thousands | 128,605 | 198,639 | 169,111 | 135,985 | 153,011 |
| Interest coverage | 2.36 | 2.92 | 2.24 | 4.19 | 3.12 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $303,374K ÷ $128,605K
= 2.36
Interest coverage ratio measures a company's ability to cover its interest expenses with its operating income. A higher interest coverage ratio indicates that the company is more capable of meeting its interest obligations. According to the data provided for Select Medical Holdings, the interest coverage ratio has varied over the years.
As of December 31, 2020, the interest coverage ratio was 3.12, indicating that the company generated operating income 3.12 times higher than its interest expenses. Subsequently, by December 31, 2021, the interest coverage ratio improved to 4.19, reflecting a stronger ability to cover interest costs.
However, there was a decrease in the interest coverage ratio to 2.24 by December 31, 2022, suggesting that the company's operating income might not be as sufficient to cover its interest payments compared to the previous year. The ratio saw a slight recovery to 2.92 by the end of December 31, 2023.
By December 31, 2024, the interest coverage ratio dropped further to 2.36, indicating a potential increase in financial risk due to a decrease in the ability to cover interest expenses. It is essential for the company to closely monitor its interest coverage ratio to ensure it maintains a healthy financial position and can meet its debt obligations comfortably.
Peer comparison
Dec 31, 2024