Lesson 4 of 8
Coverage across the market
Interest coverage across every covered US company with filed statements. The median is 1.18 times, and the quartile below it does not cover its interest at all.
By Javier Sanz
Founder of ValueScreener. Built Ninety Nine, a securities services provider, and sold it to a tier-one global bank; ran operations and internationalization at Alpaca, the brokerage API.
Who writes thisEditorial processLinkedIn (opens in a new tab)X (opens in a new tab)
In one minute
- Across 2,577 covered US companies with filed statements, median interest coverage is 1.18 times.
- The 25th percentile is negative 9.24, so a quarter of the cohort does not cover interest out of operating income at all.
- A single company's coverage figure means very little until you know the shape of the distribution it sits in.
Most readers carry an idea of what a normal interest coverage ratio looks like, and the idea usually comes from large companies. The distribution across everything with filed statements is a different object.
Interest coverage across covered US companies with filed statements
- 10th percentile: −76.07x
- 25th percentile: −9.24x
- median: 1.18x
- 75th percentile: 6.24x
- 90th percentile: 23.39x
What the cohort is
One row per company, deduplicated, drawn only from companies whose filed statements are on record. Companies for which the ratio is not applicable are excluded rather than scored, and the breakpoints are computed after clamping the extreme one percent at each end to the observed values there, so the cohort that produced the breakpoints is the cohort reported.
That last detail matters more here than on most ratios, because interest coverage has no natural bound in either direction and a handful of companies with a tiny interest expense would otherwise move a percentile on their own.
The median is close to one
Half of the covered companies with filed statements earned less than 1.18 times their interest bill from operating income. Not a comfortable multiple. Just over it.
The reason is composition rather than distress. A covered universe with filed statements includes several thousand companies that are small, early or loss making, and the cohort is not weighted by size. A median across all of them is not the median a reader has in mind when they picture a company.
A quarter of them are negative
The 25th percentile is negative 9.24 times, which is what a negative operating income over a positive interest expense produces. The 10th percentile is negative 76.07. These are companies with an interest bill and an operating loss, and the ratio for them is an arithmetic artefact rather than a measure of anything.
What this does and does not license
It licenses one habit: before quoting a company's coverage ratio, look at the distribution it sits in, because the words strong and weak have no content without one.
It licenses nothing about the future. A distribution measured on a date is a photograph. Two readings of it a year apart would be a comparison, and even that would be a comparison of two cohorts rather than a measurement of change, since which companies have filed statements on record is itself not fixed.
Check yourself
What is the median interest coverage across the covered US companies with filed statements?
- About 6 times
- 1.18 times, measured across a cohort of 2,577 companies
- About 23 times
Show the answer
Answer: B.
6.24 is the 75th percentile and 23.39 the 90th. The median sits just above one, which surprises most readers whose intuition comes from large companies.What does a coverage figure of negative 9.24 at the 25th percentile mean?
- The company is paying negative interest
- Operating income was negative against a positive interest expense, so the ratio is an artefact rather than a measure
- The figure was computed incorrectly
Show the answer
Answer: B.
A quarter of the cohort did not cover interest out of operating income at all. The negative sign carries the operating loss, not the interest.Why is the cohort clamped at the extreme one percent before breakpoints are computed?
- To exclude companies with no debt
- Because coverage has no natural bound, so a few companies with a tiny interest expense could move a percentile on their own
- To reduce the cohort size
Show the answer
Answer: B.
Values are clamped rather than dropped, so the cohort that produced the breakpoints is the whole cohort reported.Sources
- GET /api/public/distribution/interest_coverage, whole-market cohort of 2,577 deduplicated companies at the VERIFIED tier, as of 15 September 2026, read 16 September 2026.
- Micron Technology, Inc., annual reports on Form 10-K for the fiscal years ended 28 August 2025 (accession 0000723125-25-000028) and 31 August 2023 (accession 0000723125-23-000054).
What this leaves out
- This is a heterodox tradition. The mainstream account of the same phenomenon differs, and nothing here is a forecast or a view on any security.
- The cohort is one row per company among those with filed statements on record. It is not the whole US market, it is not size weighted, and companies for which the ratio is not applicable are excluded rather than scored.
- The breakpoints describe a single date. They are not a time series and nothing about change can be read from them.
- Nothing here is a view on Micron or on any security.