Investment Thesis
Black Hills Corp demonstrates strong operational profitability with 98.2% gross margins and 25.9% operating margins, but fundamental financial health is deteriorating with negative free cash flow of -$91.2M, liquidity ratios below 1.0x, and declining net income despite minimal revenue growth. The capital-intensive business model is burning cash as CapEx ($267.4M) far exceeds operating cash flow ($176.2M), creating unsustainable funding pressure.
Strengths
- Exceptional gross margin of 98.2% demonstrates strong pricing power in regulated utility sector
- Solid operating margin of 25.9% reflects operational efficiency despite asset-heavy business model
- Consistent profitability with $131.0M net income and adequate interest coverage of 3.9x
Risks
- Severe negative free cash flow of -$91.2M indicates cash burn is unsustainable; CapEx of $267.4M significantly exceeds operating cash flow
- Liquidity crisis signals: current ratio of 0.65x and quick ratio of 0.53x are dangerously below 1.0x with only $23.6M cash against $10.8B assets
- Poor capital efficiency with ROE of 3.3% and ROA of 1.2% suggests deployed capital generates inadequate returns
- Stagnant growth with revenue up only 1.0% YoY and net income declining 2.7% YoY despite profitability
- High leverage with $4.0B long-term debt (1.01x debt-to-equity) combined with minimal cash reserves
Key Metrics to Watch
- Free cash flow trend and CapEx sustainability relative to operating cash generation
- Liquidity metrics and cash balance given upcoming debt service obligations
- Revenue growth acceleration and operating cash flow improvement
- Return on equity trajectory and capital allocation decisions
Financial Metrics
Revenue
780.7M
Net Income
131.0M
EPS (Diluted)
$1.73
Free Cash Flow
-91.2M
Total Assets
10.8B
Cash
23.6M
Profitability Ratios
Gross Margin
98.2%
Operating Margin
25.9%
Net Margin
16.8%
ROE
3.3%
ROA
1.2%
FCF Margin
-11.7%
Balance Sheet & Liquidity
Current Ratio
0.65x
Quick Ratio
0.53x
Debt/Equity
1.01x
Debt/Assets
0.0%
Interest Coverage
3.89x
Long-term Debt
4.0B
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: 2026-05-08T09:21:15.548865 |
Data as of: 2026-03-31 |
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