Investment Thesis
MKS demonstrates solid 9.6% revenue growth and healthy 47% gross margins, but fundamental efficiency metrics are deeply concerning with ROE of 3%, ROA of 1%, and minimal FCF generation ($28M or 2.6% of revenue). The severe divergence between operating income ($149M) and operating cash flow ($53M) signals potential working capital stress or earnings quality issues that offset the positive growth narrative.
Strengths
- Steady revenue growth of 9.6% YoY in stable industrial instruments sector
- Strong gross margin of 47% indicates pricing power and operational cost control
- Moderate leverage at 0.94x Debt/Equity with adequate interest coverage of 3.3x
Risks
- Critically low returns: ROE of 3% and ROA of 1% indicate severe capital inefficiency
- Operating cash flow ($53M) trails operating income ($149M) by 64%, suggesting working capital drain or earnings quality deterioration
- Quick ratio of 0.70x below 1.0x threshold signals liquidity constraints; weak FCF ($28M) limits flexibility to service $2.6B debt
Key Metrics to Watch
- Operating cash flow to operating income ratio - monitor earnings quality and working capital management
- Return on equity and return on assets - must improve from 3%/1% to justify capital structure
- Free cash flow generation and net working capital trends - critical for debt sustainability
Financial Metrics
Revenue
1.1B
Net Income
84.0M
EPS (Diluted)
$1.18
Free Cash Flow
28.0M
Total Assets
8.7B
Cash
463.0M
Profitability Ratios
Gross Margin
47.0%
Operating Margin
13.8%
Net Margin
7.8%
ROE
3.0%
ROA
1.0%
FCF Margin
2.6%
Balance Sheet & Liquidity
Current Ratio
1.11x
Quick Ratio
0.70x
Debt/Equity
0.94x
Debt/Assets
67.8%
Interest Coverage
3.31x
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: 2026-05-08T11:21:01.441082 |
Data as of: 2026-03-31 |
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