Vontier Corp (VNT)
Interest coverage
| Dec 31, 2024 | Sep 30, 2024 | Jun 30, 2024 | Mar 31, 2024 | Dec 31, 2023 | Sep 30, 2023 | Jun 30, 2023 | Mar 31, 2023 | Dec 31, 2022 | Sep 30, 2022 | Jun 30, 2022 | Mar 31, 2022 | Dec 31, 2021 | ||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) (ttm) | US$ in thousands | 537,000 | 534,100 | 545,200 | 551,700 | 543,400 | 553,400 | 561,000 | 576,900 | 577,900 | 582,400 | 599,600 | 584,100 | 582,200 |
| Interest expense (ttm) | US$ in thousands | 74,700 | 148,000 | 130,000 | 112,600 | 94,700 | 67,900 | 67,800 | 67,600 | 67,500 | 37,000 | 37,100 | 37,200 | 37,100 |
| Interest coverage | 7.19 | 3.61 | 4.19 | 4.90 | 5.74 | 8.15 | 8.27 | 8.53 | 8.56 | 15.74 | 16.16 | 15.70 | 15.69 |
December 31, 2024 calculation
Interest coverage = EBIT (ttm) ÷ Interest expense (ttm)
= $537,000K ÷ $74,700K
= 7.19
The interest coverage ratio is an important financial metric that indicates a company's ability to meet its interest obligations on outstanding debt. It is calculated by dividing a company's earnings before interest and taxes (EBIT) by its interest expense.
Based on the provided data for Vontier Corp, the interest coverage ratio fluctuated over the period from December 31, 2021, to December 31, 2024. The interest coverage ratio stood at a healthy level of around 15.69 to 16.16 in the initial quarters of 2022, indicating that the company had sufficient earnings to cover its interest expenses comfortably.
However, there was a noticeable decline in the interest coverage ratio starting from the end of 2022, dropping to as low as 3.61 by September 30, 2024. This significant decrease suggests that the company's ability to cover its interest payments with its operating earnings weakened considerably within that period.
The sudden drop in the interest coverage ratio raises concerns about Vontier Corp's financial health and ability to service its debt obligations. A lower interest coverage ratio indicates higher financial risk, as the company may struggle to meet its interest payments from its operating profits.
In conclusion, Vontier Corp experienced a substantial deterioration in its interest coverage ratio from 2022 to 2024, signaling potential financial challenges ahead. It is essential for investors and stakeholders to closely monitor the company's financial performance and debt management strategies to assess its sustainability in the long term.
Peer comparison
Dec 31, 2024