Investment Thesis
Builders FirstSource is operationally unprofitable with a net margin of -1.4% and interest coverage of 0.3x, indicating the company cannot service its 4.7B in long-term debt from operations. Revenue decline of 7.4% YoY combined with deteriorating profitability (net income down 59.6% YoY) signals structural weakness in a cyclical sector, creating meaningful restructuring and default risk.
Strengths
- Positive operating cash flow of 87.5M and free cash flow of 40.7M provide near-term debt service capacity
- Gross margins of 28.3% demonstrate product-level profitability and pricing power in core operations
- Current ratio of 1.76x and quick ratio of 1.09x provide adequate short-term liquidity cushion
Risks
- Interest coverage ratio of 0.3x is critically low—operating income cannot cover interest expense, requiring asset sales or restructuring
- Company is operationally unprofitable with negative net margin of -1.4%, negative ROE of -1.2%, and negative ROA of -0.4%
- Revenue declining 7.4% YoY in cyclical building materials sector with profitability deteriorating 59.6% YoY—suggests sector weakness and limited margin recovery
- High leverage with debt/equity of 1.17x and 4.7B long-term debt against only 98.3M cash and 4.0B equity
Key Metrics to Watch
- Interest coverage ratio—must return above 1.0x to demonstrate debt sustainability
- Operating margin—needs improvement from 0.5% to 3%+ for profitability
- Revenue stabilization—monitor YoY trends for bottom in construction cycle
- Free cash flow conversion—track OCF generation to assess debt deleveraging progress
Financial Metrics
Revenue
3.3B
Net Income
-47.4M
EPS (Diluted)
$-0.43
Free Cash Flow
40.7M
Total Assets
11.3B
Cash
98.3M
Profitability Ratios
Gross Margin
28.3%
Operating Margin
0.5%
Net Margin
-1.4%
ROE
-1.2%
ROA
-0.4%
FCF Margin
1.2%
Balance Sheet & Liquidity
Current Ratio
1.76x
Quick Ratio
1.09x
Debt/Equity
1.17x
Debt/Assets
64.6%
Interest Coverage
0.30x
Long-term Debt
4.7B
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: 2026-05-06T17:06:49.983170 |
Data as of: 2026-03-31 |
Powered by Claude AI