Investment Thesis
Starco Brands is in acute financial distress with unsustainable losses ($20.9M net loss on $31.1M revenue), negative cash burn (-$900.8K OCF), and critical liquidity constraints (0.90x current ratio). With minimal cash of $1.8M and zero revenue growth, the company faces imminent solvency risk without significant operational restructuring or capital infusion.
Strengths
- Gross margin of 50.4% indicates core business pricing power
- Moderate debt-to-equity ratio of 0.68x shows leverage is not at crisis level
- Established revenue base of $31.1M demonstrates market presence
Risks
- Critical liquidity crisis: current ratio of 0.90x and quick ratio of 0.56x unable to cover short-term obligations
- Severe cash burn: negative operating cash flow of $900.8K with only $1.8M cash (~2 year runway)
- Catastrophic profitability: net margin of -67.4% and operating margin of -60.5% indicate business model is broken
- Zero revenue growth (0% YoY) with no path to profitability from expansion
- Razor-thin equity of $5.1M provides minimal cushion for losses or dilutive financing
- No insider buying activity in 90 days signals lack of management confidence
Key Metrics to Watch
- Operating Cash Flow - trajectory critical for bankruptcy risk assessment
- Cash Balance and Burn Rate - determines runway before distressed financing or default
- Operating Expenses as % of Revenue - key to understanding if restructuring is occurring
- Revenue Growth Rate - essential inflection point for viability
- Debt Refinancing Activity - will indicate lender/creditor confidence
Financial Metrics
Revenue
31.1M
Net Income
-20.9M
EPS (Diluted)
$-0.03
Free Cash Flow
-1.0M
Total Assets
35.9M
Cash
1.8M
Profitability Ratios
Gross Margin
50.4%
Operating Margin
-60.5%
Net Margin
-67.4%
ROE
-408.9%
ROA
-58.4%
FCF Margin
-3.3%
Balance Sheet & Liquidity
Current Ratio
0.90x
Quick Ratio
0.56x
Debt/Equity
0.68x
Debt/Assets
60.4%
Interest Coverage
-149.58x
Long-term Debt
3.5M
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: 2026-04-16T16:51:22.691446 |
Data as of: 2025-12-31 |
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