Investment Thesis
Despite reporting strong net income growth (+61.2% YoY) and high margins (23.2%), Ingevity exhibits severe financial distress: negative operating cash flow (-$2.0M), negative free cash flow (-$12.3M), and critically dangerous leverage with interest coverage of 0.4x indicating inability to service $1.2B debt from operations. Revenue contraction (-2.7% YoY) combined with extreme debt/equity ratio (31.03x) and minimal equity base ($38.9M) suggest significant solvency risk.
Strengths
- Strong net income growth at +61.2% YoY
- Healthy gross margin of 45.1% and net margin of 23.2%
- Adequate cash position of $95.4M provides near-term liquidity buffer
Risks
- Interest coverage of 0.4x - operating income cannot cover interest expense, indicating imminent debt service risk
- Negative operating cash flow (-$2.0M) and negative free cash flow (-$12.3M) - profits not converting to cash, earnings quality concern
- Extreme leverage with 31.03x debt/equity ratio and $1.2B debt against only $38.9M equity - structural solvency risk
- Declining revenue (-2.7% YoY) signals organic growth challenges and top-line contraction
- Quick ratio of 0.92x below critical 1.0x threshold, indicating liquidity strain
Key Metrics to Watch
- Operating cash flow trend and return to positive territory
- Interest coverage ratio improvement and debt reduction progress
- Revenue stabilization and return to growth
- Free cash flow generation and sustainability of cash position
- Debt/equity deleveraging trajectory
Financial Metrics
Revenue
258.0M
Net Income
59.8M
EPS (Diluted)
$1.66
Free Cash Flow
-12.3M
Total Assets
1.7B
Cash
95.4M
Profitability Ratios
Gross Margin
45.1%
Operating Margin
11.7%
Net Margin
23.2%
ROE
153.7%
ROA
3.6%
FCF Margin
-4.8%
Balance Sheet & Liquidity
Current Ratio
1.42x
Quick Ratio
0.92x
Debt/Equity
31.03x
Debt/Assets
97.6%
Interest Coverage
0.39x
Long-term Debt
1.2B
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: 2026-05-08T11:32:14.603286 |
Data as of: 2026-03-31 |
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