Investment Thesis
Gorman Rupp demonstrates strong operational efficiency with 32% net income growth and solid margins, supported by excellent liquidity ratios. However, critical weaknesses including 1.0x interest coverage (barely covering debt service), low capital returns (4.2% ROE), and slowing revenue growth (+3.4%) offset these gains and constrain financial flexibility.
Strengths
- Strong net income growth of 32.2% YoY driven by operational leverage and cost control
- Excellent liquidity position with 2.93x current ratio and 1.76x quick ratio providing financial stability
- Solid operating margins of 15.6% and positive free cash flow of $17.7M demonstrating cash generation capability
Risks
- Critical interest coverage ratio of 1.0x indicates operating income barely covers debt service, limiting flexibility for downturns
- Low capital efficiency with ROE of 4.2% and ROA of 2.1% suggest inefficient use of $425.6M equity base
- Slowing revenue growth of 3.4% paired with $292.8M long-term debt creates risk if business momentum deteriorates further
Key Metrics to Watch
- Interest coverage ratio - must improve above 1.5x to reduce financial distress risk
- Revenue growth acceleration - current 3.4% insufficient to support debt burden; target 6%+ growth needed
- Operating cash flow to debt ratio - monitor ability to service and reduce debt load relative to cash generation
Financial Metrics
Revenue
176.6M
Net Income
17.8M
EPS (Diluted)
$0.68
Free Cash Flow
17.7M
Total Assets
861.9M
Cash
29.9M
Profitability Ratios
Gross Margin
32.5%
Operating Margin
15.6%
Net Margin
10.1%
ROE
4.2%
ROA
2.1%
FCF Margin
10.0%
Balance Sheet & Liquidity
Current Ratio
2.93x
Quick Ratio
1.76x
Debt/Equity
0.69x
Debt/Assets
50.6%
Interest Coverage
1.02x
Long-term Debt
292.8M
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: 2026-04-29T14:53:46.302421 |
Data as of: 2026-03-31 |
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