Investment Thesis
Jacobs Solutions exhibits significant financial deterioration with net income declining 4.8% YoY and EPS collapsing 62.3% despite 4.6% revenue growth, signaling operational dysfunction. Most critically, negative operating cash flow of -$103.4M indicates the company is not converting revenue into cash, suggesting severe working capital mismanagement or project execution challenges. Combined with razor-thin margins (1.1% net), elevated leverage (1.24x D/E), and inadequate interest coverage (1.7x), the company faces material financial stress.
Strengths
- Revenue growth of 4.6% YoY demonstrates ongoing market demand for construction services
- Gross margin of 22.3% is healthy and typical for heavy construction contractors
- Cash balance of $1.4B provides near-term liquidity buffer for operations
Risks
- Negative operating cash flow of -$103.4M despite positive revenue indicates fundamental working capital management failure or project cost overruns
- Severe 62.3% EPS decline combined with 4.8% net income decline reveals deteriorating profitability and potential margin compression
- Extremely thin net margin of 1.1% and operating margin of 2.2% leave zero margin for adverse conditions or expense increases
- High leverage (1.24x D/E) with weak interest coverage (1.7x) creates meaningful refinancing risk if operational performance continues declining
- Poor capital efficiency with ROE of 2.4% and ROA of 0.7% indicates inefficient capital deployment
Key Metrics to Watch
- Operating cash flow trend - critical to confirm this is cyclical versus structural deterioration
- Operating margin expansion - must improve materially to create financial stability
- Interest coverage ratio - monitor closely given debt levels and operational stress
- Debt reduction trajectory - essential to de-lever given cash burn and operational challenges
Financial Metrics
Revenue
7.0B
Net Income
79.6M
EPS (Diluted)
$0.79
Free Cash Flow
-140.0M
Total Assets
11.9B
Cash
1.4B
Profitability Ratios
Gross Margin
22.3%
Operating Margin
2.2%
Net Margin
1.1%
ROE
2.4%
ROA
0.7%
FCF Margin
-2.0%
Balance Sheet & Liquidity
Current Ratio
1.43x
Quick Ratio
1.43x
Debt/Equity
1.24x
Debt/Assets
0.0%
Interest Coverage
1.73x
Long-term Debt
4.1B
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: 2026-05-07T09:24:21.743275 |
Data as of: 2026-03-27 |
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