Investment Thesis
Kartoon Studios is fundamentally distressed with $6.4M net losses on only $7.2M revenue (-87.9% net margin), burning $2.9M in operating cash annually with no growth. Liquidity is strained (0.98x current ratio) and the company is destroying shareholder value (ROE -29.9%) while depleting a modest $5M cash reserve at unsustainable rates.
Strengths
- Zero long-term debt eliminates refinancing risk and provides financial flexibility
- Positive gross profit of $554.2K demonstrates some revenue-to-profit conversion capability
- Modest sequential improvement in net loss (0.7% YoY) and EPS (-9.3% YoY improvement)
Risks
- Severe operating losses with -38.7% operating margin indicating structural business model problems
- Negative free cash flow of -$2.9M annually depleting cash reserves; $5M balance insufficient at current burn rate
- Liquidity crisis emerging with current ratio of 0.98x indicating current liabilities exceed current assets
- Stagnant revenue growth of 0% YoY with no evidence of recovery or scaling capability
- Deeply negative returns (ROE -29.9%, ROA -10.0%) destroying all shareholder capital
Key Metrics to Watch
- Operating cash flow trend and monthly cash burn rate to estimate runway
- Revenue growth rate and gross margin expansion; requires minimum positive operating margin path
- Current ratio and working capital position; watch for covenant violations or liquidity events
Financial Metrics
Revenue
7.2M
Net Income
-6.4M
EPS (Diluted)
$-0.10
Free Cash Flow
-2.9M
Total Assets
63.6M
Cash
5.0M
Profitability Ratios
Gross Margin
7.7%
Operating Margin
-38.7%
Net Margin
-87.9%
ROE
-29.9%
ROA
-10.0%
FCF Margin
-39.9%
Balance Sheet & Liquidity
Current Ratio
0.98x
Quick Ratio
0.98x
Debt/Equity
0.00x
Debt/Assets
64.5%
Interest Coverage
-12.03x
Long-term Debt
0.0
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: 2026-05-23T09:33:52.408403 |
Data as of: 2026-03-31 |
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