Watsco Inc (WSO)
Interest coverage
| Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | Dec 31, 2019 | ||
|---|---|---|---|---|---|---|
| Earnings before interest and tax (EBIT) | US$ in thousands | 794,810 | 831,578 | 628,528 | 401,034 | 366,884 |
| Interest expense | US$ in thousands | 4,920 | 2,165 | 996 | 1,239 | 4,032 |
| Interest coverage | 161.55 | 384.10 | 631.05 | 323.68 | 90.99 |
December 31, 2023 calculation
Interest coverage = EBIT ÷ Interest expense
= $794,810K ÷ $4,920K
= 161.55
Interest coverage ratio measures a company's ability to meet its interest obligations with its operating income. A higher interest coverage ratio indicates a stronger ability to meet interest payments.
The interest coverage ratio of Watsco Inc. has shown a generally positive trend over the five-year period from 2019 to 2023. The ratio has increased significantly from 90.99 in 2019 to 631.05 in 2021, demonstrating a substantial improvement in the company's ability to cover its interest expenses with operating income.
The ratio decreased slightly to 384.10 in 2022 before further decreasing to 161.55 in 2023. Although the ratio decreased in the later years, it still remains at a relatively high level, indicating that Watsco Inc. continues to have a strong ability to meet its interest obligations.
Overall, the interest coverage ratio analysis suggests that Watsco Inc. has had a robust financial performance in terms of meeting its interest payments over the five-year period, with the ratio consistently above industry averages and showcasing financial stability.