Investment Thesis
Regal Rexnord exhibits deteriorating operational fundamentals with declining revenue and net income, coupled with severely weak returns on capital (ROE 0.9%, ROA 0.5%). Most critically, the company is burning cash with negative free cash flow of -2.5M despite positive operating income, and interest coverage of only 1.4x indicates insufficient buffer for debt servicing if operating conditions worsen further.
Strengths
- Adequate short-term liquidity with 2.17x current ratio
- Moderate leverage at 0.69x debt-to-equity ratio
- Reasonable gross margin of 37.2% indicates core production efficiency
Risks
- Negative free cash flow (-2.5M) despite $152.7M operating income signals capital structure stress
- Interest coverage of 1.4x is dangerously low; minimal buffer if EBIT declines further
- Revenue contracting 1.6% YoY with net income down 0.5% indicates declining business momentum
- Abysmal capital efficiency with ROE 0.9% and ROA 0.5% shows poor asset utilization
- Operating cash flow only $14.9M on $1.5B revenue (0.99% conversion) is critically weak
- High insider filing activity (37 Form 4s in 90 days) may signal insider concern
Key Metrics to Watch
- Free cash flow trend and operating cash flow conversion to revenue
- Interest coverage ratio and debt refinancing capacity
- Revenue growth trajectory and operating margin sustainability
- Capital allocation priorities: debt reduction vs. shareholder returns
Financial Metrics
Revenue
1.5B
Net Income
64.3M
EPS (Diluted)
$0.96
Free Cash Flow
-2.5M
Total Assets
13.8B
Cash
401.0M
Profitability Ratios
Gross Margin
37.2%
Operating Margin
10.3%
Net Margin
4.3%
ROE
0.9%
ROA
0.5%
FCF Margin
-0.2%
Balance Sheet & Liquidity
Current Ratio
2.17x
Quick Ratio
1.08x
Debt/Equity
0.69x
Debt/Assets
0.0%
Interest Coverage
1.45x
Long-term Debt
4.7B
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: 2026-05-08T12:13:00.107273 |
Data as of: 2026-03-31 |
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