Investment Thesis
Baker Hughes demonstrates financial stability with strong gross margins (67.3%) and adequate liquidity, but fundamental health is undermined by concerning earnings quality and cash flow metrics. The extreme revenue increase (+12,593% YoY) coupled with declining net income suggests acquisition-driven growth that has not translated into operational improvement, while free cash flow margin of only 2.5% against net margin of 14.1% indicates significant cash conversion challenges.
Strengths
- Excellent gross margins of 67.3% demonstrate pricing power and product differentiation
- Strong liquidity position with current ratio of 2.13x and substantial cash reserves of $14.8B
- Reasonable debt-to-equity ratio of 0.80x provides financial flexibility
Risks
- Quality of earnings concern: revenue surged 12,593% YoY while net income declined 1.4%, indicating value destruction from acquisition or restructuring
- Severely depressed free cash flow margin of 2.5% relative to net margin of 14.1% suggests poor cash conversion despite high nominal profitability
- Weak return metrics with ROE of 4.8% and ROA of 1.8% indicate inefficient capital deployment despite $50.9B in assets
Key Metrics to Watch
- Free cash flow generation and FCF margin trend to confirm cash conversion improvement
- Organic revenue growth rate excluding M&A impact to assess underlying business momentum
- Return on equity trajectory to determine if capital is being deployed efficiently
Financial Metrics
Revenue
6.6B
Net Income
930.0M
EPS (Diluted)
$2.98
Free Cash Flow
164.0M
Total Assets
50.9B
Cash
14.8B
Profitability Ratios
Gross Margin
67.3%
Operating Margin
19.3%
Net Margin
14.1%
ROE
4.8%
ROA
1.8%
FCF Margin
2.5%
Balance Sheet & Liquidity
Current Ratio
2.13x
Quick Ratio
1.77x
Debt/Equity
0.80x
Debt/Assets
0.0%
Interest Coverage
N/A
Long-term Debt
15.4B
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: 2026-04-29T14:38:29.462088 |
Data as of: 2026-03-31 |
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