Investment Thesis
Coastal Financial demonstrates strong revenue growth (+38.6% YoY) and robust free cash flow ($74.1M), but fundamental profitability metrics reveal severe structural issues. The interest coverage ratio of 0.5x indicates operating income cannot cover interest expenses, while ROE of 2.4% and ROA of 0.2% represent critically weak capital efficiency, suggesting deteriorating asset quality or rising funding costs that outweigh growth.
Strengths
- Strong revenue growth of 38.6% YoY demonstrates market expansion and business activity
- Robust free cash flow generation of $74.1M with 66.4% FCF margin shows cash-generating capacity
- Conservative balance sheet with zero long-term debt and $1.5B cash position provides financial flexibility
Risks
- Interest coverage ratio of 0.5x indicates operating income cannot cover interest expenses - critical structural red flag
- Critically weak ROE (2.4%) and ROA (0.2%) demonstrate poor capital efficiency and deployment
- Net income growth (3.9%) significantly lags revenue growth (38.6%), with EPS declining 6.1% YoY despite positive earnings growth - signals profitability quality and dilution concerns
Key Metrics to Watch
- Interest coverage ratio trend and drivers of rising interest expense relative to operating income
- Return on equity and return on assets - must improve to justify banking franchise value
- Net margin sustainability and whether earnings can catch up to revenue growth momentum
Financial Metrics
Revenue
111.7M
Net Income
12.0M
EPS (Diluted)
$0.78
Free Cash Flow
74.1M
Total Assets
5.7B
Cash
1.5B
Profitability Ratios
Gross Margin
N/A
Operating Margin
13.1%
Net Margin
10.8%
ROE
2.4%
ROA
0.2%
FCF Margin
66.4%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
0.00x
Debt/Assets
91.1%
Interest Coverage
0.51x
Long-term Debt
N/A
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: 2026-05-09T08:14:21.616460 |
Data as of: 2026-03-31 |
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