Ultra Clean Holdings Inc (UCTT)

Interest coverage

		Dec 31, 2023	Dec 31, 2022	Dec 31, 2021	Dec 31, 2020	Dec 31, 2019
Earnings before interest and tax (EBIT)	US$ in thousands	28,600	112,200	171,600	113,800	26,200
Interest expense	US$ in thousands	48,800	33,900	24,200	16,900	25,600
Interest coverage		0.59	3.31	7.09	6.73	1.02

December 31, 2023 calculation

Interest coverage = EBIT ÷ Interest expense
= $28,600K ÷ $48,800K
= 0.59

Interest coverage ratio measures the ability of a company to meet its interest payments on outstanding debt. A higher interest coverage ratio indicates a better ability to cover interest expenses.

Looking at the trend for Ultra Clean Holdings Inc over the past five years, the interest coverage ratio has been fluctuating. In 2023, the interest coverage ratio plummeted to 0.59, which may raise concerns about the company's ability to cover its interest payments with its operating income. This significant decrease from the previous year's ratio of 3.31 suggests a potential deterioration in the company's financial health or increased debt obligations.

Comparing the 2023 ratio to the ratios in 2021 and 2022, where the interest coverage was relatively higher at 7.09 and 6.73 respectively, it indicates a significant decline in the company's ability to cover its interest expenses. Additionally, the low interest coverage ratio of 1.02 in 2019 further highlights the volatility in the company's ability to cover its interest payments over the years.

Overall, the declining trend in Ultra Clean Holdings Inc's interest coverage ratio signals a potentially weakening financial position in terms of its ability to manage interest expenses. Investors and lenders may view this trend as a cause for concern regarding the company's debt repayment capabilities and financial stability.