Investment Thesis
Key Tronic is unprofitable with negative operating and net income of -$11.1M and -$13.4M respectively, coupled with an extremely thin gross margin of 5.6% indicating fundamental operational challenges. The company's critically low cash position of $431K combined with $99.3M in debt and inability to cover interest from operations (interest coverage -1.3x) creates significant solvency risk despite positive free cash flow.
Strengths
- Positive free cash flow of $6.3M demonstrates operational cash generation despite GAAP losses
- Current ratio of 2.06x provides short-term liquidity cushion on balance sheet
- Moderate leverage at 0.96x debt-to-equity ratio suggests balance sheet not extremely overleveraged
Risks
- Critically depleted cash position of only $431K creates acute liquidity vulnerability if operations deteriorate
- Persistent operating losses of -$11.1M with negative operating margin of -3.9% indicate structural profitability problems
- Unable to cover interest expense from operations with -1.3x interest coverage, signaling debt service stress
- Extremely thin 5.6% gross margin indicates loss of pricing power or unsustainable cost structure in competitive PCB industry
- Negative ROE of -13.0% and ROA of -4.2% indicate shareholder value destruction
Key Metrics to Watch
- Gross margin trend - any recovery critical for viability
- Operating cash flow sustainability - must remain positive to bridge to profitability
- Cash position - monitor for covenant violations or need for external financing
- Operating income - path to positive operating income is essential
Financial Metrics
Revenue
284.6M
Net Income
-13.5M
EPS (Diluted)
$-1.24
Free Cash Flow
6.3M
Total Assets
322.9M
Cash
431.0K
Profitability Ratios
Gross Margin
5.6%
Operating Margin
-3.9%
Net Margin
-4.7%
ROE
-13.0%
ROA
-4.2%
FCF Margin
2.2%
Balance Sheet & Liquidity
Current Ratio
2.06x
Quick Ratio
1.21x
Debt/Equity
0.96x
Debt/Assets
68.1%
Interest Coverage
-1.26x
Long-term Debt
99.3M
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: 2026-05-09T08:28:13.425212 |
Data as of: 2026-03-28 |
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