Investment Thesis
CPS Technologies is growing revenue at 54% YoY, but this masks severe operational issues. The company is burning cash unsustainably with negative operating cash flow (-$292K) and free cash flow (-$768K), indicating operations cannot self-fund. While the balance sheet currently provides a buffer with $5.7M cash and minimal debt, continued losses without profitability will eventually erode this advantage.
Strengths
- Strong topline growth of 54.3% YoY demonstrates market demand
- Fortress balance sheet with negligible debt (debt/equity 0.00x, only $8.1K long-term debt)
- Excellent liquidity (current ratio 5.29x, quick ratio 3.72x) providing operational flexibility
- Reasonable cash position of $5.7M relative to $29.1M total assets
Risks
- Significant negative free cash flow of -$767.8K indicating unsustainable cash burn rate
- Negative operating cash flow (-$292K) reveals operations cannot fund themselves from revenue
- Operating losses (-$522.6K) with negative operating margin of -7.4%
- Dangerously thin gross margins (8.6%) suggest fundamental pricing pressure or operational inefficiency
- At current burn rate (~$768K annually), cash runway is only 7-8 years despite growth
Key Metrics to Watch
- Operating cash flow - must turn positive for sustainability
- Gross margin expansion - critical to assess if 8.6% can improve via pricing or efficiency
- Free cash flow path to breakeven - essential milestone for viability
- Operating income trajectory toward profitability
Financial Metrics
Revenue
7.0M
Net Income
-294.2K
EPS (Diluted)
$-0.02
Free Cash Flow
-767.8K
Total Assets
29.1M
Cash
5.7M
Profitability Ratios
Gross Margin
8.6%
Operating Margin
-7.4%
Net Margin
-4.2%
ROE
-1.2%
ROA
-1.0%
FCF Margin
-10.9%
Balance Sheet & Liquidity
Current Ratio
5.29x
Quick Ratio
3.72x
Debt/Equity
0.00x
Debt/Assets
16.1%
Interest Coverage
-272.63x
Long-term Debt
8.1K
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: 2026-05-06T14:48:48.191149 |
Data as of: 2026-03-28 |
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