Investment Thesis
Patrick Industries shows revenue growth of 6.3% YoY but profitability has stalled with net income flat and EPS declining 5.1%. Most critically, the company generated negative operating cash flow (-$14.0M) and negative free cash flow (-$32.9M), indicating it cannot sustain its $1.4B debt load from operations, raising solvency concerns.
Strengths
- Revenue growth of 6.3% YoY demonstrates market demand in motor vehicle parts sector
- Interest coverage ratio of 15.1x shows current debt service capacity
- Current ratio of 2.71x provides adequate short-term liquidity cushion
Risks
- Negative operating cash flow (-$14.0M) indicates fundamental inability to generate cash from core operations
- Negative free cash flow (-$32.9M) with $1.4B long-term debt creates refinancing/solvency risk
- Net income flat YoY despite 6.3% revenue growth signals operational efficiency deterioration and margin compression
- Critically low returns on capital (ROE 3.3%, ROA 1.2%) indicate poor capital deployment
- EPS declining 5.1% YoY despite revenue growth points to per-share value erosion
- Low cash position ($37.5M) relative to debt obligations and negative cash generation
Key Metrics to Watch
- Operating cash flow trend - must return to positive to validate debt sustainability
- Free cash flow and cash position - deterioration would signal refinancing pressure
- Gross margin and operating margin trends - assess if efficiency can be recovered
- Debt refinancing activities - monitor for distressed terms indicating credit stress
Financial Metrics
Revenue
997.2M
Net Income
39.5M
EPS (Diluted)
$1.10
Free Cash Flow
-32.9M
Total Assets
3.2B
Cash
37.5M
Profitability Ratios
Gross Margin
22.8%
Operating Margin
6.5%
Net Margin
4.0%
ROE
3.3%
ROA
1.2%
FCF Margin
-3.3%
Balance Sheet & Liquidity
Current Ratio
2.71x
Quick Ratio
1.04x
Debt/Equity
1.16x
Debt/Assets
63.1%
Interest Coverage
15.05x
Long-term Debt
1.4B
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: 2026-05-08T07:42:50.291745 |
Data as of: 2026-03-29 |
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