Investment Thesis
Light & Wonder demonstrates critical balance sheet distress with a 21.25x debt-to-equity ratio and $5.2B long-term debt against $245M equity, creating significant financial risk. The 1155% revenue surge paired with 0% net income growth strongly suggests acquisition-driven expansion without profitability translation. Interest coverage of 2.2x leaves minimal buffer for operational stress, despite adequate near-term liquidity.
Strengths
- Strong operating cash flow of $794M with $509M free cash flow provides debt service capacity
- Operating margin of 20.6% demonstrates core business efficiency despite leverage concerns
- Current ratio of 1.60x and quick ratio of 1.39x support short-term liquidity needs
- Free cash flow margin of 15.4% shows underlying operational profitability quality
Risks
- Unsustainable leverage with 21.25x debt-to-equity ratio creates distress vulnerability with minimal equity cushion
- Interest coverage of 2.2x provides dangerously thin margin for downturns or rate increases on debt obligations
- Revenue growth of 1155% versus flat net income growth indicates acquisition-driven expansion without profitability gains or integration concerns
- Stockholders' equity of only $245M versus $6.2B total liabilities signals severe equity depletion and restructuring risk
- Diluted EPS down 11.4% YoY despite flat net income reflects significant shareholder dilution from acquisition financing
Key Metrics to Watch
- Debt-to-equity ratio and debt repayment progress toward sustainable leverage levels
- Interest coverage ratio stability and free cash flow adequacy for debt service obligations
- Organic revenue growth and net income margin trajectory separate from acquisition impacts
Financial Metrics
Revenue
3.3B
Net Income
276.0M
EPS (Diluted)
$3.26
Free Cash Flow
509.0M
Total Assets
6.5B
Cash
167.0M
Profitability Ratios
Gross Margin
N/A
Operating Margin
20.6%
Net Margin
8.3%
ROE
112.7%
ROA
4.3%
FCF Margin
15.4%
Balance Sheet & Liquidity
Current Ratio
1.60x
Quick Ratio
1.39x
Debt/Equity
21.25x
Debt/Assets
96.2%
Interest Coverage
2.18x
Long-term Debt
5.2B
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: 2026-04-12T09:45:29.941085 |
Data as of: 2025-12-31 |
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