Investment Thesis
Simpson Manufacturing demonstrates strong operational profitability with robust 45% gross margins and 19.5% operating margins, supported by accelerating earnings growth (EPS +8.4% YoY). However, significant concerns emerge from weak free cash flow conversion (only $17.9M on $88.2M net income) and extremely low returns on capital (ROE 4.3%, ROA 2.9%), suggesting capital efficiency issues that offset operational strength.
Strengths
- Strong and accelerating profitability: Net income +7.1% YoY, EPS +8.4% YoY on 4.5% revenue growth
- Exceptional gross and operating margins: 45.2% gross margin and 19.5% operating margin indicate pricing power and operational excellence
- Fortress balance sheet: Debt/Equity of 0.14x, current ratio of 3.4x, and $341M cash position provide substantial financial flexibility
Risks
- Severe free cash flow weakness: Only $17.9M FCF generated on $88.2M net income (20% conversion), raising earnings quality concerns
- Critically low returns on capital: ROE of 4.3% and ROA of 2.9% indicate poor capital deployment efficiency and asset productivity
- Large gap between earnings and cash flow: Operating cash flow of only $35.5M on $88.2M net income suggests potential working capital issues or unproven earnings quality
Key Metrics to Watch
- Free cash flow trend and conversion ratio to net income
- Return on equity and asset efficiency improvements
- Operating cash flow sustainability relative to reported net income
Financial Metrics
Revenue
588.0M
Net Income
88.2M
EPS (Diluted)
$2.13
Free Cash Flow
17.9M
Total Assets
3.0B
Cash
341.0M
Profitability Ratios
Gross Margin
45.2%
Operating Margin
19.5%
Net Margin
15.0%
ROE
4.3%
ROA
2.9%
FCF Margin
3.0%
Balance Sheet & Liquidity
Current Ratio
3.40x
Quick Ratio
2.02x
Debt/Equity
0.14x
Debt/Assets
32.1%
Interest Coverage
N/A
Long-term Debt
296.3M
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: 2026-05-08T06:54:00.821741 |
Data as of: 2026-03-31 |
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