SM Energy Co (SM)
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 | 1,106,880 | 1,005,830 | 1,579,480 | 209,123 | -795,715 |
| Interest expense | US$ in thousands | 140,659 | 91,630 | 120,346 | 160,353 | 163,892 |
| Interest coverage | 7.87 | 10.98 | 13.12 | 1.30 | -4.86 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $1,106,880K ÷ $140,659K
= 7.87
Interest coverage is a financial ratio that measures a company's ability to cover its interest expenses with its operating income. A higher interest coverage ratio indicates a stronger ability to meet interest obligations.
Analyzing the interest coverage of SM Energy Co over the years, the ratio was negative at -4.86 on December 31, 2020, indicating the company's operating income was insufficient to cover its interest expenses. However, there has been a significant improvement since then.
On December 31, 2021, the interest coverage ratio improved to 1.30, showing that the company's operating income could cover its interest expenses, but with little room for error.
Subsequently, on December 31, 2022, the interest coverage ratio surged to 13.12, indicating a substantial improvement in the company's ability to service its interest obligations. This positive trend continued in the following years with the ratios standing at 10.98 on December 31, 2023, and 7.87 on December 31, 2024.
Overall, the increasing trend in SM Energy Co's interest coverage ratios suggests a strengthening financial position and a better ability to manage its interest expenses effectively.
Peer comparison
Dec 31, 2024