Investment Thesis
Northwest Natural exhibits strong profitability fundamentals with 33.2% operating margins and 36.5% EPS growth, supported by 6.6% revenue expansion in a stable regulated sector. However, severe cash flow constraints and liquidity concerns—with minimal 2.5M free cash flow, current ratio of 0.80x, and debt-to-equity of 1.54x—significantly limit financial flexibility and debt service capacity.
Strengths
- Exceptional profitability metrics: 33.2% operating margin and 19.9% net margin demonstrate strong cost control in regulated utility operations
- Robust earnings growth with 36.5% YoY EPS expansion and 6.6% revenue growth indicating solid business momentum
- Regulated natural gas distribution business model provides stable cash flows and customer base with inelastic demand
Risks
- Critical liquidity position with current ratio and quick ratio both at 0.80x—unable to cover short-term liabilities with current assets
- Severely constrained free cash flow of only 2.5M (0.5% margin) after capex, with operating cash flow nearly entirely consumed by capital expenditures, limiting debt service and financial flexibility
- High leverage with debt-to-equity ratio of 1.54x, long-term debt of 2.4B exceeding stockholders equity of 1.6B, creating vulnerability to economic stress or rising interest rates
Key Metrics to Watch
- Free cash flow sustainability and capital expenditure trajectory relative to operating cash flow generation
- Working capital management and current ratio improvement toward healthier 1.0x-1.5x levels
- Debt reduction progress and leverage ratio trends, particularly debt-to-equity movement below 1.5x
Financial Metrics
Revenue
490.4M
Net Income
97.5M
EPS (Diluted)
$2.33
Free Cash Flow
2.5M
Total Assets
6.4B
Cash
34.9M
Profitability Ratios
Gross Margin
N/A
Operating Margin
33.2%
Net Margin
19.9%
ROE
6.2%
ROA
1.5%
FCF Margin
0.5%
Balance Sheet & Liquidity
Current Ratio
0.80x
Quick Ratio
0.80x
Debt/Equity
1.54x
Debt/Assets
0.0%
Interest Coverage
N/A
Long-term Debt
2.4B
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: 2026-05-08T11:39:35.329103 |
Data as of: 2026-03-31 |
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