Investment Thesis
Rocky Brands exhibits severe profitability stress with a critical 0.4x interest coverage ratio, indicating operating income cannot service debt obligations. Despite 6.2% revenue growth and acceptable gross margins of 36.5%, razor-thin operating (2.9%) and net margins (1.0%), coupled with minimal cash generation ($744K free cash flow), signal financial distress and limited viability without substantial operational improvement.
Strengths
- Revenue growth of 6.2% YoY demonstrates market demand
- Current ratio of 2.90x shows adequate short-term liquidity
- Debt-to-equity of 0.48x indicates moderate leverage levels
Risks
- Interest coverage of 0.4x is critical—operating income cannot cover interest payments
- Net margin of 1.0% and operating margin of 2.9% are dangerously low with minimal profitability cushion
- Free cash flow of only $744K provides insufficient buffer for debt service, capex, or operational challenges
- Cash balance of $1.7M is inadequate relative to $122.2M long-term debt
- ROE of 0.5% and ROA of 0.3% show extremely poor capital efficiency
Key Metrics to Watch
- Interest coverage ratio trend—must exceed 1.5x to indicate sustainable debt service
- Operating margin improvement—needs to expand significantly from 2.9% to achieve profitability
- Free cash flow generation—currently insufficient to cover debt obligations and growth investments
- Cash reserves—critical to monitor given low balance relative to debt load
Financial Metrics
Revenue
124.4M
Net Income
1.3M
EPS (Diluted)
$0.17
Free Cash Flow
744.0K
Total Assets
477.2M
Cash
1.7M
Profitability Ratios
Gross Margin
36.5%
Operating Margin
2.9%
Net Margin
1.0%
ROE
0.5%
ROA
0.3%
FCF Margin
0.6%
Balance Sheet & Liquidity
Current Ratio
2.90x
Quick Ratio
1.02x
Debt/Equity
0.48x
Debt/Assets
47.1%
Interest Coverage
0.36x
Long-term Debt
122.2M
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: 2026-05-06T13:45:30.981113 |
Data as of: 2026-03-31 |
Powered by Claude AI