Investment Thesis
FS Bancorp exhibits critical financial distress signals with an interest coverage ratio of 0.7x, meaning operating income cannot cover interest expenses—a sustainability red flag. Despite 51.3% revenue growth, net income declined 4.9% YoY, indicating severe margin compression or cost pressures, compounded by dangerously low ROE (2.5%) and ROA (0.2%) that signal profound asset inefficiency.
Strengths
- Strong revenue growth of 51.3% year-over-year demonstrates expansion in core business
- Positive free cash flow of $8.4M with 17.1% FCF margin shows cash generation
- Moderate debt-to-equity ratio of 0.59x indicates leverage is not excessive
Risks
- Critical interest coverage ratio of 0.7x cannot service debt obligations from operating income—indicates insolvency risk
- Extremely low ROE (2.5%) and ROA (0.2%) demonstrate severe capital inefficiency and poor asset utilization
- Net income declined 4.9% despite 51.3% revenue growth, suggesting deteriorating profitability or one-time charges indicating earnings quality issues
Key Metrics to Watch
- Interest coverage ratio—must improve above 2.5x to demonstrate debt sustainability
- Return on equity and return on assets—recovery from current distressed levels essential
- Margin trend analysis—clarify whether revenue growth can translate to net income growth
Financial Metrics
Revenue
49.3M
Net Income
7.8M
EPS (Diluted)
$1.02
Free Cash Flow
8.4M
Total Assets
3.2B
Cash
38.7M
Profitability Ratios
Gross Margin
N/A
Operating Margin
20.1%
Net Margin
15.9%
ROE
2.5%
ROA
0.2%
FCF Margin
17.1%
Balance Sheet & Liquidity
Current Ratio
N/A
Quick Ratio
N/A
Debt/Equity
0.59x
Debt/Assets
90.2%
Interest Coverage
0.68x
Long-term Debt
186.5M
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: 2026-05-09T07:11:17.584038 |
Data as of: 2026-03-31 |
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