Travel + Leisure Co (TNL)
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 | 733,000 | 741,000 | 682,000 | 622,000 | -86,000 |
| Interest expense | US$ in thousands | 250,000 | 251,000 | 195,000 | 198,000 | 192,000 |
| Interest coverage | 2.93 | 2.95 | 3.50 | 3.14 | -0.45 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $733,000K ÷ $250,000K
= 2.93
Interest coverage is a financial metric that indicates a company's ability to meet its interest obligations on outstanding debt. Travel + Leisure Co's interest coverage has exhibited fluctuations over the past few years.
As of December 31, 2020, the interest coverage ratio was -0.45, which implies that the company's operating income was insufficient to cover its interest expenses. This could be a concerning sign as it suggests a potential risk of default on interest payments.
The interest coverage improved significantly in the following years, reaching 3.14 as of December 31, 2021, and further increasing to 3.50 by December 31, 2022. These improvements indicate that the company's operating income became more sufficient to cover its interest expenses, reflecting a positive trend in financial health.
However, there was a slight decrease in interest coverage to 2.95 as of December 31, 2023, and remained relatively stable at 2.93 by December 31, 2024. While the ratios are above 1, indicating that the company can meet its interest obligations, a downward trend suggests potential challenges in generating enough income to cover interest expenses in the future.
Overall, monitoring the interest coverage ratio is crucial for assessing Travel + Leisure Co's ability to service its debt, and improvements in this ratio demonstrate enhanced financial strength and stability, while declines may raise concerns about the company's financial health and future debt repayment capabilities.
Peer comparison
Dec 31, 2024