Investment Thesis
Baxter is experiencing severe financial distress with negative free cash flow of -$300M annually despite 5.7% revenue growth, indicating unsustainable capital spending. The critical 0.2x interest coverage ratio signals inability to service $9.4B debt from operations, creating material default risk. Unprofitability combined with cash burn threatens financial stability.
Strengths
- Revenue growth of 5.7% YoY demonstrates continued market demand
- Reasonable gross margin of 33% indicates solid underlying unit economics
- Positive operating cash flow of $213M shows business generates operational cash
Risks
- Interest coverage of 0.2x indicates inability to cover debt service from operations - critical solvency risk
- Negative free cash flow of -$300M annually with only $2B cash on hand unsustainable at current burn rate
- High leverage with $9.4B long-term debt and 1.56x debt-to-equity ratio amid unprofitability and cash burn
- Net loss of -$15M and -0.6% net margin show company unprofitable despite revenue growth
- Capital expenditure of $513M exceeds operating cash flow, indicating unsustainable investment levels
Key Metrics to Watch
- Interest coverage ratio trend - any further deterioration compounds default risk
- Free cash flow path to positive - critical for debt sustainability
- Net margin improvement trajectory - must return to profitability
- Debt reduction progress and refinancing ability - key to solvency
Financial Metrics
Revenue
2.7B
Net Income
-15.0M
EPS (Diluted)
$-0.03
Free Cash Flow
-300.0M
Total Assets
19.8B
Cash
2.0B
Profitability Ratios
Gross Margin
33.0%
Operating Margin
2.4%
Net Margin
-0.6%
ROE
-0.2%
ROA
-0.1%
FCF Margin
-11.1%
Balance Sheet & Liquidity
Current Ratio
1.85x
Quick Ratio
1.23x
Debt/Equity
1.56x
Debt/Assets
69.7%
Interest Coverage
0.23x
Long-term Debt
9.4B
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: 2026-05-06T17:03:25.040289 |
Data as of: 2026-03-31 |
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