Investment Thesis
Helen of Troy exhibits severe financial distress with negative operating and free cash flows despite maintaining positive gross margins. The combination of declining revenue (-6.4% YoY), collapsing profitability (-826.4% net income YoY), dangerously thin interest coverage (1.2x), and $691.1M debt against minimal $21.7M cash creates material solvency and refinancing risk.
Strengths
- Gross margin of 46% demonstrates underlying product pricing power in housewares sector
- Operating margin of 15% shows profitability at the operating level despite revenue contraction
- Current ratio of 1.78x provides adequate near-term liquidity for payables
Risks
- Negative operating cash flow (-636K) and free cash flow (-6.4M) indicate inability to self-fund operations or service debt from earnings
- Interest coverage of 1.2x is critically low; minimal margin for error before covenant breaches with $691.1M total debt
- Revenue decline of 6.4% YoY coupled with net income collapse (-826.4%) signals deteriorating competitive position or demand destruction
Key Metrics to Watch
- Operating cash flow stabilization - must return to positive territory to support debt servicing
- Interest coverage improvement - target minimum 2.0x to reduce refinancing risk
- Revenue stabilization and growth - current trajectory is unsustainable given leverage level
Financial Metrics
Revenue
402.1M
Net Income
35.8M
EPS (Diluted)
$1.51
Free Cash Flow
-6.4M
Total Assets
2.1B
Cash
21.7M
Profitability Ratios
Gross Margin
46.0%
Operating Margin
15.0%
Net Margin
8.9%
ROE
4.2%
ROA
1.7%
FCF Margin
-1.6%
Balance Sheet & Liquidity
Current Ratio
1.78x
Quick Ratio
0.81x
Debt/Equity
0.82x
Debt/Assets
59.4%
Interest Coverage
1.16x
Long-term Debt
691.1M
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: 2026-08-04T06:07:26.609022 |
Data as of: 2026-05-31 |
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