Shake Shack Inc (SHAK)

Interest coverage is a financial ratio that indicates a company's ability to pay its interest expenses on outstanding debt. A higher interest coverage ratio indicates that a company is more capable of meeting its interest obligations.

Analyzing Shake Shack Inc's interest coverage over the past five years, we observe a notable fluctuation in the ratio. In 2023, the interest coverage ratio stands at 10.47, a significant improvement from the negative figures recorded in the previous years. This implies that Shake Shack's operating income is more than ten times its interest expense for the year, indicating a strong ability to cover interest payments.

The negative interest coverage ratios observed in 2022, 2021, and 2020 raise concerns about Shake Shack's ability to meet its interest obligations with operating income during those years. A negative interest coverage ratio indicates that the company's operating income was insufficient to cover its interest expenses, posing a risk of financial distress.

The interest coverage ratio of 54.49 in 2019 indicates a robust ability to cover interest expenses, reflecting a strong financial position for Shake Shack during that year.

Overall, the improvement in interest coverage in 2023 is a positive sign for Shake Shack Inc, suggesting better financial health and the company's ability to meet its interest obligations using its operating income. However, the negative ratios in previous years highlight the importance of consistent monitoring and management of the company's debt levels and interest expenses.

Peer comparison

Dec 31, 2023