Investment Thesis
Lear Corp exhibits deteriorating financial health with negative free cash flow (-$26.5M) despite positive operating cash flow, indicating capex spending exceeds operational generation. Declining net income (-17.1% YoY) and flat revenue growth combined with razor-thin margins (3.0% net) and poor returns (ROE 3.4%, ROA 1.1%) reflect structural weakness in the automotive parts supplier segment.
Strengths
- Strong interest coverage ratio (9.8x) demonstrates ability to service debt obligations
- Moderate leverage with 0.53x debt-to-equity ratio and reasonable cash position of $881.9M
- Established company with $5.8B annual revenue base in automotive supplier sector
Risks
- Negative free cash flow (-$26.5M) with capex ($124.6M) exceeding operating cash flow ($98.1M) suggests unsustainable capital structure
- Declining profitability with net income down 17.1% YoY while revenue remains flat, indicating margin compression
- Thin operating margins (4.4%) and weak returns on equity (3.4%) reflect commoditized business dynamics with limited pricing power
Key Metrics to Watch
- Free cash flow trajectory and capital expenditure levels relative to operating cash generation
- Year-over-year net income trend and gross margin stability
- Revenue growth acceleration and operating margin expansion initiatives
Financial Metrics
Revenue
5.8B
Net Income
172.3M
EPS (Diluted)
$3.34
Free Cash Flow
-26.5M
Total Assets
15.5B
Cash
881.9M
Profitability Ratios
Gross Margin
7.7%
Operating Margin
4.4%
Net Margin
3.0%
ROE
3.4%
ROA
1.1%
FCF Margin
-0.5%
Balance Sheet & Liquidity
Current Ratio
1.33x
Quick Ratio
1.05x
Debt/Equity
0.53x
Debt/Assets
0.0%
Interest Coverage
9.77x
Long-term Debt
2.7B
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: 2026-05-06T19:40:33.129075 |
Data as of: 2026-04-04 |
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