Investment Thesis
Lennox generates accounting profits but faces critical cash flow deterioration with negative FCF of -$39.4M, declining revenue (-2.7% YoY), and dangerously low cash reserves relative to $1.1B debt. The weak cash conversion despite positive net income raises sustainability concerns.
Strengths
- Solid 14.4% operating margin demonstrates operational efficiency
- Interest coverage of 10.8x provides adequate debt service capability
- Current ratio of 1.57x supports near-term obligation fulfillment
Risks
- Negative free cash flow of -$39.4M signals cash burn despite GAAP profitability
- Revenue declining 2.7% YoY with stalling growth momentum
- Quick ratio of 0.64x and $48.2M cash against $1.1B debt indicates severe liquidity stress
- Operating cash flow only $16.1M on $1.1B revenue suggests working capital deterioration
- Low ROE (9.7%) and ROA (2.7%) indicate poor capital efficiency
Key Metrics to Watch
- Operating cash flow recovery and working capital normalization
- Revenue stabilization with margin defense
- Free cash flow path to positive and debt reduction progress
Financial Metrics
Revenue
1.1B
Net Income
117.2M
EPS (Diluted)
$3.35
Free Cash Flow
-39.4M
Total Assets
4.3B
Cash
48.2M
Profitability Ratios
Gross Margin
30.9%
Operating Margin
14.4%
Net Margin
10.3%
ROE
9.7%
ROA
2.7%
FCF Margin
-3.5%
Balance Sheet & Liquidity
Current Ratio
1.57x
Quick Ratio
0.64x
Debt/Equity
0.94x
Debt/Assets
71.7%
Interest Coverage
10.76x
Long-term Debt
1.1B
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: 2026-05-06T15:34:03.122061 |
Data as of: 2026-03-31 |
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