Investment Thesis
Despite reporting strong net income growth of 108.7%, Star Group faces critical financial stress evidenced by negative operating cash flow (-$61.1M) and severely constrained liquidity (current ratio of 0.99x). With only $12.2M in cash against $265.2M in debt and minimal revenue growth of 1.0%, the company's earnings quality is questionable and its cash position is unsustainable.
Strengths
- Strong interest coverage ratio of 12.5x indicates ability to service debt obligations
- Decent profitability margins with 43.1% gross margin and 16.2% operating margin
- ROA of 12.4% demonstrates reasonable asset efficiency
Risks
- Negative operating cash flow of -$61.1M indicates core business is not generating cash
- Negative free cash flow of -$68.8M is unsustainable with $265.2M long-term debt and only $12.2M cash
- Current ratio of 0.99x and quick ratio of 0.81x signal acute liquidity stress
- Stagnant revenue growth of 1.0% YoY indicates no organic expansion
- Suspicious 108.7% net income growth with 1.0% revenue growth suggests non-recurring items masking underlying weakness
Key Metrics to Watch
- Operating cash flow trend - must turn positive within next 2-3 quarters
- Cash position and debt refinancing capabilities given current liquidity constraints
- Revenue growth acceleration - cannot sustain current trajectory at 1% growth
Financial Metrics
Revenue
1.3B
Net Income
144.1M
EPS (Diluted)
$0.00
Free Cash Flow
-68.8M
Total Assets
1.2B
Cash
12.2M
Profitability Ratios
Gross Margin
43.1%
Operating Margin
16.2%
Net Margin
11.0%
ROE
N/A
ROA
12.4%
FCF Margin
-5.3%
Balance Sheet & Liquidity
Current Ratio
0.99x
Quick Ratio
0.81x
Debt/Equity
N/A
Debt/Assets
0.0%
Interest Coverage
12.51x
Long-term Debt
265.2M
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: 2026-05-08T12:21:05.969362 |
Data as of: 2026-03-31 |
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