Investment Thesis
Spectrum Brands demonstrates adequate financial stability with strong liquidity (2.29x current ratio) and conservative leverage (0.30x D/E), but faces significant headwinds: flat revenue growth, declining net income (-0.5% YoY), and compressed margins indicate a stagnant business with deteriorating profitability. Weak returns on equity (2.7%) and thin operating margins (5.1%) suggest limited earnings power despite positive free cash flow generation.
Strengths
- Strong liquidity position with 2.29x current ratio and 1.42x quick ratio provides operational flexibility
- Conservative leverage at 0.30x Debt/Equity with $125.1M cash buffer reduces financial distress risk
- Positive free cash flow of $60.2M demonstrates ability to generate cash despite thin margins
Risks
- Zero revenue growth year-over-year signals stagnant market conditions and competitive pressures with no expansion momentum
- Deteriorating profitability with net income down 0.5% YoY and EPS declining 5.9% YoY indicates margin compression
- Thin operating margin of 5.1% and low interest coverage of 2.0x provide limited cushion for operational disruptions
- Poor return metrics (ROE 2.7%, ROA 1.5%) suggest inefficient capital utilization and value destruction
Key Metrics to Watch
- Revenue growth trajectory and market share dynamics in electrical equipment sector
- Operating margin trends and gross margin sustainability
- Free cash flow consistency and capital allocation decisions
- Interest coverage ratio and debt refinancing needs over next 12-24 months
Financial Metrics
Revenue
1.4B
Net Income
50.5M
EPS (Diluted)
$2.16
Free Cash Flow
60.2M
Total Assets
3.5B
Cash
125.1M
Profitability Ratios
Gross Margin
36.9%
Operating Margin
5.1%
Net Margin
3.6%
ROE
2.7%
ROA
1.5%
FCF Margin
4.3%
Balance Sheet & Liquidity
Current Ratio
2.29x
Quick Ratio
1.42x
Debt/Equity
0.30x
Debt/Assets
45.3%
Interest Coverage
1.96x
Long-term Debt
575.9M
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: 2026-05-09T13:10:20.938992 |
Data as of: 2026-03-29 |
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