UFP Technologies Inc (UFPT)

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	81,086	57,547	55,481	21,244	16,366
Interest expense	US$ in thousands	8,061	3,645	2,763	39	83
Interest coverage		10.06	15.79	20.08	544.72	197.18

December 31, 2024 calculation

Interest coverage = EBIT ÷ Interest expense
= $81,086K ÷ $8,061K
= 10.06

Based on the provided data, UFP Technologies Inc's interest coverage ratio has exhibited significant fluctuations over the years. In December 2020, the company had a robust interest coverage ratio of 197.18, indicating a strong capacity to meet its interest obligations from operating earnings.

By the end of December 2021, the interest coverage ratio improved further to 544.72, reflecting an even healthier financial position with a higher ability to cover its interest expense multiple times over.

However, there was a noticeable decline in the interest coverage ratio in December 2022 to 20.08, signaling a significant decrease in the company's ability to cover its interest payments from its operating income. This might raise concerns regarding the company's financial health and its ability to service its debt effectively.

The trend continued in December 2023 and December 2024, with further reductions in the interest coverage ratio to 15.79 and 10.06, respectively. These declining ratios indicate a continued challenge for UFP Technologies Inc in meeting its interest obligations solely from its operating earnings.

Overall, while the company initially exhibited strong interest coverage ratios, the subsequent decreases suggest a deterioration in its ability to comfortably cover interest expenses in recent years, highlighting a potential financial vulnerability that investors and creditors should closely monitor.