Investment Thesis
NL Industries faces fundamental operational deterioration masked by balance sheet strength. Despite 8.5% revenue growth, net income declined 6.9% YoY with EPS collapsing 155.8%, while negative operating cash flow (-$3.5M) indicates the business is not converting reported profits into actual cash generation. Extremely poor returns on capital (ROE 1.2%, ROA 0.9%) reveal the company is destroying shareholder value.
Strengths
- Zero long-term debt with strong liquidity position ($101.9M cash, 10.65x current ratio)
- Revenue growth of 8.5% YoY demonstrates maintained market demand
- Positive net margin (10.7%) and gross margin (32.7%) remain profitable despite trends
Risks
- Negative operating cash flow (-$3.5M) despite positive net income signals unsustainable profitability or working capital distress
- Declining net income (-6.9% YoY) and catastrophic EPS decline (-155.8% YoY) despite revenue growth indicates severe operational inefficiency
- Critically low returns on equity (1.2%) and assets (0.9%) demonstrate capital is being destroyed rather than deployed effectively
Key Metrics to Watch
- Operating cash flow trend - must return to positive to validate business sustainability
- Net income and operating margin progression - need to identify root cause of compression relative to revenue growth
- Return on equity and working capital efficiency - must improve materially to restore shareholder value creation
Financial Metrics
Revenue
40.6M
Net Income
4.3M
EPS (Diluted)
$0.09
Free Cash Flow
-3.9M
Total Assets
461.2M
Cash
101.9M
Profitability Ratios
Gross Margin
32.7%
Operating Margin
10.1%
Net Margin
10.7%
ROE
1.2%
ROA
0.9%
FCF Margin
-9.7%
Balance Sheet & Liquidity
Current Ratio
10.65x
Quick Ratio
8.60x
Debt/Equity
0.00x
Debt/Assets
0.0%
Interest Coverage
14.02x
Long-term Debt
0.0
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: 2026-05-08T11:33:54.056165 |
Data as of: 2026-03-31 |
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