Investment Thesis
Vestis Corp is facing significant operational deterioration with declining revenue (-2.5% YoY), negative and worsening net income (-$3.8M, -291.8% YoY), and critically insufficient interest coverage (0.5x) indicating the company cannot service its $1.1B debt load from operating earnings. Despite positive free cash flow, the fundamental profitability collapse and high leverage (1.29x D/E) present material solvency risks.
Strengths
- Positive free cash flow of $73.9M with 5.6% FCF margin
- Strong liquidity with current ratio of 2.13x and quick ratio of 1.69x
- Positive operating income of $43.4M despite revenue pressures
Risks
- Critical interest coverage ratio of 0.5x - insufficient operating income to cover debt obligations
- Net income negative at -$3.8M with severe YoY deterioration of -291.8%
- Revenue declining YoY at -2.5% with negative net and operating margins deteriorating
- High leverage of 1.29x debt-to-equity with $1.1B long-term debt against only $50.3M cash
- Negative return on equity (-0.4%) and return on assets (-0.1%)
Key Metrics to Watch
- Interest coverage ratio trend - must move above 1.0x to reduce default risk
- Revenue stabilization and return to growth - current declining trend unsustainable
- Free cash flow sustainability - positive FCF may be required to refinance debt
- Debt refinancing activities and covenant compliance status
Financial Metrics
Revenue
1.3B
Net Income
-3.8M
EPS (Diluted)
$-0.03
Free Cash Flow
73.9M
Total Assets
2.9B
Cash
50.3M
Profitability Ratios
Gross Margin
N/A
Operating Margin
3.3%
Net Margin
-0.3%
ROE
-0.4%
ROA
-0.1%
FCF Margin
5.6%
Balance Sheet & Liquidity
Current Ratio
2.13x
Quick Ratio
1.69x
Debt/Equity
1.29x
Debt/Assets
69.8%
Interest Coverage
0.46x
Long-term Debt
1.1B
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: 2026-05-13T07:08:39.665333 |
Data as of: 2026-04-03 |
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