Investment Thesis
HF Foods faces critical financial distress with an interest coverage ratio of 0.4x, indicating operating income cannot service its debt obligations. The company generates zero free cash flow despite positive operating cash flow, with capex consuming all cash generation, while collapsed operating margins of 0.3% provide no buffer in the competitive wholesale grocery sector.
Strengths
- Debt-to-equity ratio of 0.49x indicates controlled leverage relative to equity base
- Gross margin of 16.2% is acceptable for wholesale grocery distribution business
- Generated positive operating cash flow of $15.3M in latest period
Risks
- Interest coverage ratio of 0.4x - operating income cannot cover debt interest expense, creating insolvency risk
- Free cash flow essentially zero while capex matches operating cash generation, leaving nothing for debt reduction or contingencies
- Operating margin of 0.3% is critically thin with no operational flexibility against margin compression
- Quick ratio of 0.49x and only $11.1M cash indicate severe liquidity constraints
- ROE of 0.6% and ROA of 0.2% demonstrate capital is deployed inefficiently
Key Metrics to Watch
- Interest coverage ratio must improve above 1.0x to demonstrate debt sustainability
- Free cash flow must turn positive to validate business model viability
- Operating margin expansion needed above 0.5% minimum to maintain competitive position
- Cash position and working capital trends given tight quick ratio
Financial Metrics
Revenue
312.0M
Net Income
1.2M
EPS (Diluted)
$0.02
Free Cash Flow
-45.0K
Total Assets
545.9M
Cash
11.1M
Profitability Ratios
Gross Margin
16.2%
Operating Margin
0.3%
Net Margin
0.4%
ROE
0.6%
ROA
0.2%
FCF Margin
0.0%
Balance Sheet & Liquidity
Current Ratio
1.11x
Quick Ratio
0.49x
Debt/Equity
0.49x
Debt/Assets
62.5%
Interest Coverage
0.37x
Long-term Debt
100.7M
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: 2026-05-13T08:35:03.261754 |
Data as of: 2026-03-31 |
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