Investment Thesis
AECOM exhibits deteriorating operational fundamentals with net income declining 11.7% YoY despite flat revenue, indicating severe margin compression in an already thin-margin business. The company carries excessive leverage (1.17x D/E) while generating minimal free cash flow (0.2% margin), severely constraining financial flexibility and raising concerns about debt sustainability.
Strengths
- Profitable with positive operating cash flow of $74M
- Adequate interest coverage ratio of 5.3x provides debt service capability
- Established market position as major engineering services provider with $7.6B revenue base
Risks
- Net income declining 11.7% YoY while revenue flat indicates significant margin compression and operational deterioration
- Free cash flow of only $14.5M (0.2% margin) insufficient to service $2.7B debt with high leverage ratio of 1.17x D/E
- Critically thin profitability margins (7.6% gross, 6.2% operating, 3.3% net) leave no room for error or market downturns
- Weak liquidity position with current ratio of 1.11x and quick ratio of 1.11x limits financial flexibility
- Stalled revenue growth of 0.2% YoY suggests no organic growth momentum or competitive advantage
Key Metrics to Watch
- Free cash flow generation and path to positive FCF margin above 2-3%
- Gross margin trend and evidence of pricing power or cost control
- Debt/Equity ratio and deleveraging progress toward sub-1.0x
- Revenue growth acceleration above 2% and operating margin recovery
Financial Metrics
Revenue
7.6B
Net Income
254.4M
EPS (Diluted)
$1.95
Free Cash Flow
14.5M
Total Assets
12.0B
Cash
1.0B
Profitability Ratios
Gross Margin
7.6%
Operating Margin
6.2%
Net Margin
3.3%
ROE
11.2%
ROA
2.1%
FCF Margin
0.2%
Balance Sheet & Liquidity
Current Ratio
1.11x
Quick Ratio
1.11x
Debt/Equity
1.17x
Debt/Assets
79.4%
Interest Coverage
5.28x
Long-term Debt
2.7B
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: 2026-05-13T06:40:52.553453 |
Data as of: 2026-03-31 |
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