Investment Thesis
MachTen demonstrates strong profitability metrics (35.4% operating margin, 25.8% net margin) and exceptional returns on equity (36.7%), but critical operational concerns undermine fundamental quality. The company faces severe liquidity constraints (0.30x current ratio), negative free cash flow (-$2.0M), and CapEx spending that significantly exceeds operating cash generation, indicating unsustainable capital allocation despite near-term profitability.
Strengths
- Exceptional net margin of 25.8% and operating margin of 35.4% demonstrate strong pricing power and cost control
- Outstanding ROE of 36.7% and ROA of 10.3% indicate efficient asset utilization and shareholder value generation
- Strong interest coverage ratio of 48.2x reflects minimal debt burden and financial flexibility on liabilities
Risks
- Critical liquidity crisis with current ratio of 0.30x and quick ratio of 0.30x - company cannot cover short-term obligations with current assets
- Negative free cash flow of -$2.0M despite $4.5M operating cash flow reveals CapEx of $6.5M is unsustainable and strains financial position
- High financial leverage with total liabilities of $21.6M against equity of $8.4M, and minimal cash reserves of $1.6M create refinancing risk
Key Metrics to Watch
- Free cash flow trend and CapEx spending rationalization - must turn positive within 2-3 quarters
- Current ratio and working capital position - any deterioration signals insolvency risk
- Operating cash flow sustainability - must increase to support capital investments without liquidity deterioration
Financial Metrics
Revenue
12.0M
Net Income
3.1M
EPS (Diluted)
$0.98
Free Cash Flow
-2.0M
Total Assets
30.0M
Cash
1.6M
Profitability Ratios
Gross Margin
N/A
Operating Margin
35.4%
Net Margin
25.8%
ROE
36.7%
ROA
10.3%
FCF Margin
-16.5%
Balance Sheet & Liquidity
Current Ratio
0.30x
Quick Ratio
0.30x
Debt/Equity
0.00x
Debt/Assets
71.9%
Interest Coverage
48.18x
Long-term Debt
N/A
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: 2026-04-01T12:24:11.165586 |
Data as of: 2023-09-30 |
Powered by Claude AI