Investment Thesis
Archrock demonstrates strong operational performance with 28.7% revenue growth and healthy operating margins (26.1%), supported by solid free cash flow generation of $72.4M. However, significant concerns exist: net income grew only 1.0% despite strong revenue growth, minimal cash position of $4.5M, high leverage (Debt/Equity 1.57x), and exceptionally weak returns on equity (4.9%) and assets (1.7%), indicating inefficient capital deployment.
Strengths
- Strong revenue growth of 28.7% YoY demonstrates robust market demand in natural gas transmission
- Healthy operating margins (26.1%) and gross margins (47.5%) reflect operational efficiency
- Positive free cash flow of $72.4M (19.4% FCF margin) provides cushion for debt service and operations
Risks
- Net income growth of only 1.0% YoY despite 28.7% revenue growth suggests margin compression or rising costs
- Critically low cash position of $4.5M creates liquidity vulnerability relative to $4.4B asset base
- High leverage (Debt/Equity 1.57x, 1.57x) with quick ratio of 0.91x limits financial flexibility and increases refinancing risk
Key Metrics to Watch
- Net income growth trend versus revenue growth to determine if margin pressure is structural
- Operating cash flow consistency and free cash flow sustainability for debt service
- Cash balance and working capital position given current liquidity constraints
Financial Metrics
Revenue
373.8M
Net Income
73.8M
EPS (Diluted)
$0.41
Free Cash Flow
72.4M
Total Assets
4.4B
Cash
4.5M
Profitability Ratios
Gross Margin
47.5%
Operating Margin
26.1%
Net Margin
19.7%
ROE
4.9%
ROA
1.7%
FCF Margin
19.4%
Balance Sheet & Liquidity
Current Ratio
1.41x
Quick Ratio
0.91x
Debt/Equity
1.57x
Debt/Assets
65.4%
Interest Coverage
3.57x
Long-term Debt
2.4B
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: 2026-05-07T07:35:45.434158 |
Data as of: 2026-03-31 |
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