Investment Thesis
Arcosa demonstrates solid revenue growth at 12.2% YoY, but severe profitability deterioration with net income nearly flat at 0.2% growth signals operational margin compression despite top-line expansion. Weak capital returns (ROE 1.4%, ROA 0.8%) and tight interest coverage (2.0x) indicate poor asset deployment efficiency, offset partially by strong liquidity and reasonable leverage positioning.
Strengths
- Solid revenue growth of 12.2% YoY demonstrates market demand and pricing power
- Strong liquidity with current ratio of 2.31x and quick ratio of 1.60x provides financial flexibility
- Moderate leverage at 0.57x Debt/Equity allows capacity for strategic investments or debt reduction
Risks
- Severe earnings-to-revenue growth divergence (net income +0.2% vs revenue +12.2%) indicates gross or operating margin compression requiring investigation
- Critically low returns on equity (1.4%) and assets (0.8%) suggest fundamental capital efficiency problems or asset impairment issues
- Interest coverage ratio of 2.0x is tight with limited cushion for revenue fluctuations or unexpected costs in cyclical fabricated metals sector
Key Metrics to Watch
- Operating margin trend and gross margin composition to identify source of profitability pressure
- Free cash flow conversion and capital expenditure efficiency as percentage of revenue growth
- Interest coverage ratio movements in relation to debt levels and operational cash flow sustainability
Financial Metrics
Revenue
571.7M
Net Income
37.8M
EPS (Diluted)
$0.77
Free Cash Flow
28.4M
Total Assets
5.0B
Cash
153.2M
Profitability Ratios
Gross Margin
21.1%
Operating Margin
8.2%
Net Margin
6.6%
ROE
1.4%
ROA
0.8%
FCF Margin
5.0%
Balance Sheet & Liquidity
Current Ratio
2.31x
Quick Ratio
1.60x
Debt/Equity
0.57x
Debt/Assets
47.0%
Interest Coverage
1.96x
Long-term Debt
1.5B
Disclaimer: This analysis is generated by AI based on publicly available SEC EDGAR filings.
It does not include stock price data and should not be considered financial advice.
All fundamental data is sourced from SEC public domain filings.
Always conduct your own research before making investment decisions.
Data Source: SEC EDGAR |
Analysis Date: 2026-05-06T16:47:45.751013 |
Data as of: 2026-03-31 |
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