Cactus Inc (WHD)
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 | 301,550 | 272,612 | 183,148 | 75,427 | 71,903 |
Interest expense | US$ in thousands | 2,274 | 10,236 | 1,063 | 959 | 1,127 |
Interest coverage | 132.61 | 26.63 | 172.29 | 78.65 | 63.80 |
December 31, 2024 calculation
Interest coverage = EBIT ÷ Interest expense
= $301,550K ÷ $2,274K
= 132.61
The interest coverage ratio measures a company's ability to meet its interest obligations on outstanding debt, with a higher ratio indicating a stronger ability to cover interest expenses.
Analyzing Cactus Inc's interest coverage over the past five years shows a mixed trend. In December 2020, the interest coverage ratio stood at 63.80, indicating that the company's operating income was sufficient to cover its interest expenses almost 64 times. This suggests a healthy financial position at the end of 2020.
By December 2021, Cactus Inc's interest coverage ratio had improved further to 78.65, reflecting an even better ability to cover its interest payments from operating income. The increasing trend in the ratio suggests improving financial health and a reduced risk of default due to inadequate earnings coverage of interest expenses.
However, in December 2022, there was a significant spike in the interest coverage ratio to 172.29. This exceptionally high ratio suggests that Cactus Inc's operating income was significantly higher than its interest expenses, indicating a very strong ability to fulfill its interest obligations and potentially invest in growth opportunities.
The trend reversed in December 2023 with a sharp decline in the interest coverage ratio to 26.63. This decrease may raise concerns about the company's ability to meet its interest payments comfortably from operating income, indicating a potential strain on financial resources.
In December 2024, the interest coverage ratio rebounded to 132.61, showing a significant improvement from the previous year. This suggests that Cactus Inc's operating income was more than sufficient to cover its interest expenses, indicating a recovery in financial strength.
Overall, Cactus Inc's interest coverage ratio has shown fluctuations over the five-year period, with periods of strong financial stability and moments of strain. It is essential for investors and stakeholders to closely monitor the trend in the interest coverage ratio to assess the company's ability to manage its debt obligations effectively and sustain its financial health.
Peer comparison
Dec 31, 2024