Investment Thesis
Hayward Holdings exhibits fundamental distress despite reported earnings growth. Operating cash flow is deeply negative (-$150.6M) while net income is positive, indicating severe working capital or earnings quality issues. Interest coverage of 0.8x means the company cannot cover debt service from operations, creating an unsustainable financial position.
Strengths
- Strong gross margin of 46.5% demonstrates pricing power and operational efficiency
- Net income growing 27.7% YoY, outpacing revenue growth of 6.7%, shows improving margins
- Excellent short-term liquidity with current ratio of 3.26x and quick ratio of 2.47x
Risks
- Operating cash flow is -$150.6M while net income is +$23.4M - massive disconnect signals working capital deterioration or earnings quality concerns
- Interest coverage ratio of 0.8x indicates company cannot service debt from operating income, creating critical solvency risk
- Free cash flow of -$157.8M with -61.8% FCF margin means the company is not self-sustaining and burning cash despite profitability claims
- Very low returns on equity (1.4%) and assets (0.7%) despite 46.5% gross margins indicate poor capital efficiency
- Long-term debt of $942.8M represents significant leverage relative to $23.4M net income
Key Metrics to Watch
- Operating cash flow trend - must return to positive to validate earnings quality
- Interest coverage ratio - needs to exceed 1.5x minimum to ensure debt serviceability
- Working capital changes - identify root cause of cash burn discrepancy with reported earnings
- Free cash flow generation - monitor path to positive FCF and cash runway sustainability
Financial Metrics
Revenue
255.2M
Net Income
23.4M
EPS (Diluted)
$0.11
Free Cash Flow
-157.8M
Total Assets
3.1B
Cash
135.8M
Profitability Ratios
Gross Margin
46.5%
Operating Margin
16.6%
Net Margin
9.2%
ROE
1.4%
ROA
0.7%
FCF Margin
-61.8%
Balance Sheet & Liquidity
Current Ratio
3.26x
Quick Ratio
2.47x
Debt/Equity
0.58x
Debt/Assets
48.6%
Interest Coverage
0.84x
Long-term Debt
942.8M
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: 2026-05-06T15:24:12.171072 |
Data as of: 2026-03-28 |
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