Investment Thesis
Karman Holdings shows bottom-line improvement but faces severe financial distress signals: interest coverage of 0.5x indicates inability to service $769.8M debt with operating earnings, negative free cash flow of -$7.2M is unsustainable, and zero revenue growth suggests stagnation. Despite improved net income (+36.7% YoY), the company's extremely low returns (1.9% ROE, 0.5% ROA) and 1.90x leverage create structural vulnerability.
Strengths
- Net income up 36.7% YoY and EPS up 62.5% YoY shows recent profitability improvement
- Gross margin of 42.2% and operating margin of 14.2% are reasonable for aerospace parts manufacturing
- Strong liquidity with 3.53x current ratio and 3.38x quick ratio provide near-term cash cushion
Risks
- Critical: Interest coverage ratio of 0.5x - operating income insufficient to cover interest expense on $769.8M debt
- Negative free cash flow of -$7.2M is unsustainable and limits debt reduction capacity
- Zero YoY revenue growth indicates market stagnation despite sector presence; profitability gains may be cost-cutting rather than operational strength
- Extremely low returns: 1.9% ROE and 0.5% ROA suggest inefficient capital deployment and troubled asset base
Key Metrics to Watch
- Interest coverage ratio trending and debt service capability
- Free cash flow turn positive and operating cash flow improvement
- Revenue growth acceleration to above 0% in next quarters
Financial Metrics
Revenue
151.2M
Net Income
7.8M
EPS (Diluted)
$0.06
Free Cash Flow
-7.2M
Total Assets
1.4B
Cash
73.8M
Profitability Ratios
Gross Margin
42.2%
Operating Margin
14.2%
Net Margin
5.2%
ROE
1.9%
ROA
0.5%
FCF Margin
-4.7%
Balance Sheet & Liquidity
Current Ratio
3.53x
Quick Ratio
3.38x
Debt/Equity
1.90x
Debt/Assets
71.4%
Interest Coverage
0.47x
Long-term Debt
769.8M
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: 2026-05-15T08:09:58.129124 |
Data as of: 2026-03-31 |
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