Ultra Clean Holdings Inc (UCTT)

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	91,200	28,600	112,200	171,600	113,800
Interest expense	US$ in thousands	3,600	48,800	33,900	24,200	16,900
Interest coverage		25.33	0.59	3.31	7.09	6.73

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $91,200K ÷ $3,600K
= 25.33

The interest coverage ratio of Ultra Clean Holdings Inc has shown varying trends over the years. In 2020, the interest coverage ratio was 6.73, indicating the company's ability to cover its interest expenses approximately 6.73 times with its operating income. The ratio improved slightly in 2021 to 7.09, suggesting a stronger ability to meet interest obligations.

However, there was a significant decline in the interest coverage ratio in 2022 to 3.31, signaling a potential strain on the company's ability to cover interest costs with operating income. This decline could be a red flag for investors and creditors as it may indicate financial distress or increased financial risk.

The interest coverage ratio deteriorated further in 2023 to 0.59, implying a substantial decrease in the company's ability to service its interest payments from operating earnings. A ratio below 1 raises concerns about the company's financial health and its ability to meet debt obligations.

Remarkably, in 2024, the interest coverage ratio surged to 25.33, indicating a significant improvement in Ultra Clean Holdings Inc's ability to cover interest expenses with operating income. This sharp increase could be a positive sign of improved profitability and financial performance.

Overall, fluctuations in the interest coverage ratio of Ultra Clean Holdings Inc over the years highlight the importance of closely monitoring the company's financial health and assessing its ability to manage debt obligations in a dynamic business environment. Investors and stakeholders should carefully consider these ratios in their evaluation of the company's financial stability and risk management.