Semtech Corporation (SMTC)

Interest coverage

		Jan 28, 2024	Jan 29, 2023	Jan 30, 2022	Jan 31, 2021	Jan 26, 2020
Earnings before interest and tax (EBIT)	US$ in thousands	-945,698	96,370	146,294	68,676	52,009
Interest expense	US$ in thousands	95,813	17,646	5,091	5,336	8,622
Interest coverage		-9.87	5.46	28.74	12.87	6.03

January 28, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $-945,698K ÷ $95,813K
= -9.87

The interest coverage ratio for Semtech Corporation has fluctuated over the past five years. In January 2024, the interest coverage ratio was negative at -9.87, indicating that the company's earnings before interest and taxes (EBIT) were insufficient to cover its interest expenses. This suggests a potential financial risk as the company may struggle to meet its interest obligations.

In contrast, in January 2023 and January 2022, the interest coverage ratios improved to 5.46 and 28.74, respectively. These higher ratios suggest a healthier financial position, with the company generating more than enough operating income to cover its interest expenses comfortably.

However, the interest coverage ratio decreased in January 2021 to 12.87 and again in January 2020 to 6.03. While still at levels suggesting the ability to cover interest payments, these declines may signal a slight weakening in the company's ability to service its debt obligations from its operating profits.

Overall, the trend in Semtech Corporation's interest coverage ratio shows variability in its ability to cover interest expenses over the past five years, with some periods of strength and others of potential financial strain. Monitoring this ratio will be important for assessing the company's financial health and risk management in the future.