Investment Thesis
Sensata Technologies faces deteriorating fundamentals characterized by revenue decline (-5.8% YoY), collapsing diluted EPS (-75.3% YoY), and critically, an interest coverage ratio of 0.9x indicating inability to cover interest expenses from operating income. While positive free cash flow and strong liquidity ratios provide near-term stability, the debt burden, weak returns on capital (ROE 3.1%, ROA 1.3%), and negative growth trajectory suggest structural challenges outweighing operational strength.
Strengths
- Strong liquidity position with 2.75x current ratio and $635.1M cash reserves
- Positive free cash flow of $104.6M provides financial flexibility
- Reasonable gross margin (31.7%) and operating margin (15.1%) despite revenue pressures
Risks
- Interest coverage ratio of 0.9x is critical red flag—operating income insufficient to cover interest obligations
- Revenue declining 5.8% YoY with diluted EPS collapsing 75.3% YoY indicates deteriorating business quality
- Weak returns on capital (ROE 3.1%, ROA 1.3%) with $2.8B long-term debt on $2.9B equity suggests overleveraged capital structure
Key Metrics to Watch
- Interest coverage ratio trend—movement above 1.0x critical
- Revenue trajectory—stabilization or continued decline
- Debt levels and refinancing risk—ability to service obligations amid declining cash generation
Financial Metrics
Revenue
934.8M
Net Income
87.1M
EPS (Diluted)
$0.59
Free Cash Flow
104.6M
Total Assets
6.8B
Cash
635.1M
Profitability Ratios
Gross Margin
31.7%
Operating Margin
15.1%
Net Margin
9.3%
ROE
3.1%
ROA
1.3%
FCF Margin
11.2%
Balance Sheet & Liquidity
Current Ratio
2.75x
Quick Ratio
1.95x
Debt/Equity
0.99x
Debt/Assets
58.1%
Interest Coverage
0.91x
Long-term Debt
2.8B
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: 2026-05-06T13:55:20.649257 |
Data as of: 2026-03-31 |
Powered by Claude AI