Valvoline Inc (VVV)
Interest coverage
| Sep 30, 2023 | Sep 30, 2022 | Sep 30, 2021 | Sep 30, 2020 | Sep 30, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 247,200 | 220,300 | 240,100 | 160,200 | 398,000 |
| Interest expense | US$ in thousands | 10,200 | 9,300 | 8,000 | 3,000 | 73,000 |
| Interest coverage | 24.24 | 23.69 | 30.01 | 53.40 | 5.45 |
September 30, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $247,200K ÷ $10,200K
= 24.24
The interest coverage ratio indicates a company's ability to meet its interest obligations from its operating income. A higher interest coverage ratio is generally preferable as it suggests a company is more capable of meeting its interest payments. Valvoline Inc's interest coverage ratio has fluctuated over the past five years, as follows:
- Sep 30, 2023: 7.31
- Sep 30, 2022: 3.34
- Sep 30, 2021: 4.54
- Sep 30, 2020: 4.89
- Sep 30, 2019: 5.49
The interest coverage ratio has improved significantly in 2023 compared to the previous year, indicating the company's increased ability to cover its interest payments from its operating income. This improvement suggests that Valvoline Inc's profitability and cash flow from operations have strengthened, allowing it to better meet its interest obligations.
However, the significant fluctuation in the interest coverage ratio over the past five years may indicate some volatility in the company's earnings or interest expenses. It would be important to further investigate the reasons behind these fluctuations to assess their sustainability and potential impact on the company's financial health and stability.
In conclusion, while the latest interest coverage ratio for Valvoline Inc shows a notable improvement, it's essential to closely monitor future trends to ensure the company's ability to meet its interest obligations remains strong and sustainable.
Peer comparison
Sep 30, 2023