Switch to:
Valspar Corp (NYSE:VAL)
Interest Coverage
9.30 (As of Oct. 2014)

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense. Valspar Corp's Operating Income for the three months ended in Oct. 2014 was $163 Mil. Valspar Corp's Interest Expense for the three months ended in Oct. 2014 was $-18 Mil. Valspar Corp's interest coverage for the quarter that ended in Oct. 2014 was 9.30. The higher the ratio, the stronger the company’s financial strength is.

VAL' s 10-Year Interest Coverage Range
Min: 2.22   Max: 31.67
Current: 8.57

2.22
31.67

During the past 13 years, the highest interest coverage of Valspar Corp was 31.67. The lowest was 2.22. And the median was 6.59.

VAL's Interest Coverageis ranked higher than
55% of the 737 Companies
in the Global Specialty Chemicals industry.

( Industry Median: 21.08 vs. VAL: 8.57 )

Definition

Interest Coverage is a ratio that determines how easily a company can pay interest expenses on outstanding debt. It is calculated by dividing a company’s Operating Income (EBIT) by its Interest Expense:

If Interest Expense is negative and Operating Income is positive, then

Interest Coverage=-1*Operating Income/Interest Expense

Else if Interest Expense is negative and Operating Income is negative, then

Valspar Corp did not have earnings to cover the interest expense.

Else if Interest Expense is 0 and Long-Term Debt is 0, or Interest Expense is positive, then

Valspar Corp had no debt.

Valspar Corp's Interest Coverage for the fiscal year that ended in Oct. 2014 is calculated as

Here, for the fiscal year that ended in Oct. 2014, Valspar Corp's Interest Expense was $-65 Mil. Its Operating Income was $560 Mil. And its Long-Term Debt was $950 Mil.

Interest Coverage=-1*Operating Income (A: Oct. 2014 )/Interest Expense (A: Oct. 2014 )
=-1*559.909/-65.33
=8.57

Valspar Corp's Interest Coverage for the quarter that ended in Oct. 2014 is calculated as

Here, for the three months ended in Oct. 2014, Valspar Corp's Interest Expense was $-18 Mil. Its Operating Income was $163 Mil. And its Long-Term Debt was $950 Mil.

Interest Coverage=-1*Operating Income (Q: Oct. 2014 )/Interest Expense (Q: Oct. 2014 )
=-1*162.746/-17.505
=9.30

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

The higher the ratio, the stronger the company’s financial strength is.


Explanation

Ben Graham requires that a company has a minimum interest coverage of 5 with the companies he invested. If the interest coverage is less than 2, the company is burdened by debt. Any business slow or recession may drag the company into a situation where it cannot pay the interest on its debt.

Interest Coverage is an important factor when GuruFocus ranks a company’s overage financial strength.


Related Terms

Operating Income, Interest Expense, Financial Strength


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Valspar Corp Annual Data

Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14
interest_coverage 6.086.655.025.085.776.456.017.137.608.57

Valspar Corp Quarterly Data

Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14Jul14Oct14
interest_coverage 8.647.395.898.169.726.686.009.089.829.30
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)
Free 7-day Trial
FEEDBACK