Investment Thesis
Gartner exhibits strong operational fundamentals with exceptional profitability margins (71.9% gross, 20.9% operating) and robust free cash flow generation ($391M, 25.9% margin), but severe balance sheet risks with extreme leverage (46.98x Debt/Equity), minimal equity base ($63.4M), and deteriorating earnings (-39.7% EPS YoY) create significant solvency concerns despite solid interest coverage.
Strengths
- Exceptional gross margin of 71.9% and operating margin of 20.9% demonstrate strong pricing power and operational efficiency
- Robust free cash flow generation of $391M with 25.9% FCF margin provides financial flexibility despite high leverage
- Solid interest coverage ratio of 16.4x indicates ability to service debt obligations despite leveraged structure
Risks
- Extreme leverage with Debt/Equity ratio of 46.98x and stockholders' equity of only $63.4M creates critical solvency risk and limits financial flexibility
- Current ratio below 1.0 (0.94x) indicates potential short-term liquidity pressure despite $1.7B cash position
- Significant earnings deterioration with diluted EPS declining 39.7% YoY raises concerns about underlying business quality and growth trajectory
Key Metrics to Watch
- Trend in revenue growth rate and operating margins - monitor for further deterioration
- Debt reduction progress and path to lower leverage ratios - equity base must strengthen
- Operating cash flow sustainability and conversion rates - critical given dividend/debt service obligations
Financial Metrics
Revenue
1.5B
Net Income
222.3M
EPS (Diluted)
$3.18
Free Cash Flow
391.0M
Total Assets
7.7B
Cash
1.7B
Profitability Ratios
Gross Margin
71.9%
Operating Margin
20.9%
Net Margin
14.7%
ROE
350.8%
ROA
2.9%
FCF Margin
25.9%
Balance Sheet & Liquidity
Current Ratio
0.94x
Quick Ratio
0.94x
Debt/Equity
46.98x
Debt/Assets
99.2%
Interest Coverage
16.45x
Long-term Debt
3.0B
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: 2026-05-07T09:23:29.047146 |
Data as of: 2026-03-31 |
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