Investment Thesis
Despite massive nominal revenue growth, Quaker Chemical exhibits deteriorating profitability and alarming cash flow dynamics. The company generated negative free cash flow of -$6.9M against operating cash flow of only $3.8M, signaling severe operational stress. Critically weak returns (ROE 1.4%, ROA 0.7%) and declining EPS (-102.2% YoY) despite revenue expansion indicate fundamental profitability challenges that offset positive liquidity metrics.
Strengths
- Solid liquidity position with current ratio of 2.45x and quick ratio of 1.77x
- Reasonable gross margin of 36.8% indicating some pricing power
- Moderate leverage with debt-to-equity ratio of 0.61x, providing debt capacity
Risks
- Negative free cash flow of -$6.9M signals the company is consuming cash despite positive net income, indicating unsustainable operations
- Anemic returns on equity (1.4%) and assets (0.7%) reflect severe capital inefficiency and value destruction for shareholders
- EPS declined 102.2% YoY while revenue surged 224203% YoY, suggesting the revenue growth came from a non-accretive acquisition or forced margin compression
Key Metrics to Watch
- Free cash flow trend and operating cash flow conversion to identify if cash burn is structural or transient
- Return on equity and return on assets for evidence of operational improvement
- Margin sustainability as integration (if acquisition-driven) completes
Financial Metrics
Revenue
480.5M
Net Income
19.7M
EPS (Diluted)
$1.13
Free Cash Flow
-6.9M
Total Assets
2.8B
Cash
169.7M
Profitability Ratios
Gross Margin
36.8%
Operating Margin
7.0%
Net Margin
4.1%
ROE
1.4%
ROA
0.7%
FCF Margin
-1.4%
Balance Sheet & Liquidity
Current Ratio
2.45x
Quick Ratio
1.77x
Debt/Equity
0.61x
Debt/Assets
50.8%
Interest Coverage
3.53x
Long-term Debt
837.1M
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: 2026-05-06T18:05:12.578192 |
Data as of: 2026-03-31 |
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