Investment Thesis
ACME UNITED faces fundamental operational challenges with stagnant growth (1.1% revenue expansion), negative operating cash flow (-$2.2M despite positive net income), and critically thin profitability margins (1.9% net, 3.3% operating). While the balance sheet provides defensive strength through low leverage and strong liquidity, the company is burning cash operationally and generating negligible returns on capital (ROE 0.8%, ROA 0.5%), indicating structural profitability issues rather than temporary headwinds.
Strengths
- Strong liquidity position with 4.57x current ratio and 1.83x quick ratio
- Conservative leverage at 0.28x debt-to-equity with adequate 3.6x interest coverage
- Reasonable gross margin of 39.7% suggests product-level economics are intact
Risks
- Negative operating cash flow of -$2.2M despite positive net income signals working capital deterioration and earnings quality concerns
- Negative free cash flow of -$4.1M makes current operations unsustainable without external funding or asset liquidation
- Minimal revenue growth (1.1% YoY) combined with razor-thin net margin (1.9%) leaves no room for demand softness or cost pressures
- Extremely poor capital efficiency (ROE 0.8%, ROA 0.5%) indicates shareholders and assets are generating minimal returns
- Low cash balance ($4.2M) relative to $195M asset base limits financial flexibility
Key Metrics to Watch
- Operating cash flow trend—must return to positive to validate earnings sustainability
- Working capital changes and inventory/receivables levels—explaining the OCF deterioration
- Revenue growth acceleration—1.1% growth insufficient to support operational turnaround
Financial Metrics
Revenue
52.3M
Net Income
985.0K
EPS (Diluted)
$0.24
Free Cash Flow
-4.1M
Total Assets
195.2M
Cash
4.2M
Profitability Ratios
Gross Margin
39.7%
Operating Margin
3.3%
Net Margin
1.9%
ROE
0.8%
ROA
0.5%
FCF Margin
-7.9%
Balance Sheet & Liquidity
Current Ratio
4.57x
Quick Ratio
1.83x
Debt/Equity
0.28x
Debt/Assets
40.2%
Interest Coverage
3.59x
Long-term Debt
33.0M
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: 2026-05-07T06:01:55.305293 |
Data as of: 2026-03-31 |
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