Investment Thesis
BorgWarner faces deteriorating fundamentals with flat revenue growth, 17.3% YoY net income decline, and critically low free cash flow generation (0.3% FCF margin). Despite adequate liquidity and debt coverage ratios, the company is generating minimal excess cash to service its $3.9B debt load or fund growth, indicating fundamental business weakness in a sector undergoing structural transition.
Strengths
- Strong liquidity position with 2.13x current ratio and 1.75x quick ratio
- Solid interest coverage of 13.4x demonstrates ability to service debt obligations
- Reasonable gross margin of 19.2% and stable operating cash flow of $152M
Risks
- Zero revenue growth (0% YoY) indicates stagnant market demand or lost market share
- Declining profitability with net income down 17.3% YoY and ROE/ROA of only 4.4% and 1.8%
- Critical free cash flow weakness at only $9M ($3.5B revenue) with CapEx consuming 94% of operating cash flow, limiting debt reduction and growth investment
- High debt burden of $3.9B with deteriorating ability to generate excess cash for deleveraging
Key Metrics to Watch
- Free cash flow trends and FCF margin expansion/contraction
- Revenue growth inflection and operating leverage recovery
- Debt-to-EBITDA ratio and cash deployment for deleveraging vs. capex
Financial Metrics
Revenue
3.5B
Net Income
242.0M
EPS (Diluted)
$1.16
Free Cash Flow
9.0M
Total Assets
13.7B
Cash
2.3B
Profitability Ratios
Gross Margin
19.2%
Operating Margin
9.5%
Net Margin
6.8%
ROE
4.4%
ROA
1.8%
FCF Margin
0.3%
Balance Sheet & Liquidity
Current Ratio
2.13x
Quick Ratio
1.75x
Debt/Equity
0.71x
Debt/Assets
58.7%
Interest Coverage
13.44x
Long-term Debt
3.9B
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: 2026-05-08T09:27:52.319690 |
Data as of: 2026-03-31 |
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