Investment Thesis
While HireQuest presents strong balance sheet metrics and low leverage, critical red flags undermine confidence in reported fundamentals. The impossible 123.4% gross margin indicates serious data quality issues, and the severe disconnect between $1.6M net income and $250K operating cash flow (only 15% conversion) suggests major earnings quality concerns or hidden working capital strain. The combination of weak cash generation, low cash reserves relative to liabilities, and modest 5.7% revenue growth does not justify the risk profile.
Strengths
- Fortress balance sheet with 0.05x debt-to-equity ratio and 2.69x current ratio
- Strong interest coverage of 184.5x demonstrates minimal financial distress risk
- EPS growth of 73.1% YoY shows per-share improvement despite modest revenue growth
Risks
- Gross margin of 123.4% is mathematically impossible, indicating severe data integrity or accounting anomalies
- Operating cash flow of only $250K versus $1.6M net income represents catastrophic 85% earnings leakage, signaling either non-cash accounting or severe working capital deterioration
- Cash position of $1.0M is dangerously low relative to $23.8M total liabilities and provides minimal operational cushion
- Revenue growth of only 5.7% YoY is weak for staffing services sector
- Disconnect between stated 23.9% net margin and actual ROE of 2.3% / ROA of 1.7% raises fundamental questions about asset efficiency
Key Metrics to Watch
- Operating cash flow trend and sustainability of cash conversion
- Gross margin normalization and verification of COGS accounting
- Working capital movements and cash balance trajectory
Financial Metrics
Revenue
6.5M
Net Income
1.6M
EPS (Diluted)
$0.11
Free Cash Flow
250.0K
Total Assets
91.1M
Cash
1.0M
Profitability Ratios
Gross Margin
123.4%
Operating Margin
22.6%
Net Margin
23.9%
ROE
2.3%
ROA
1.7%
FCF Margin
3.8%
Balance Sheet & Liquidity
Current Ratio
2.69x
Quick Ratio
2.69x
Debt/Equity
0.05x
Debt/Assets
26.1%
Interest Coverage
184.50x
Long-term Debt
3.6M
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: 2026-05-14T08:28:51.700454 |
Data as of: 2026-03-31 |
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