Investment Thesis
Werner Enterprises faces critical financial distress with an interest coverage ratio of 0.5x, indicating operating income cannot cover interest expenses—a bankruptcy-level concern. Despite modest revenue growth of 2.6%, the company is unprofitable with negative net income and net margins, and carries $878.2M in long-term debt against only $61.5M in cash. While positive free cash flow of $30.7M provides near-term survival capacity, the combination of negative profitability, unsustainable debt service, and microscopic operating margins (0.5%) creates severe financial risk.
Strengths
- Positive free cash flow of $30.7M provides operational flexibility despite negative profitability
- Operating cash flow of $83.5M exceeds capital expenditure, generating meaningful cash generation
- Moderate leverage ratio of 0.65x Debt/Equity and acceptable liquidity (1.46x current ratio) relative to industry
Risks
- Interest coverage ratio of 0.5x indicates operating income cannot cover interest expenses—a critical bankruptcy red flag
- Negative net profitability (-$4.3M net income, -0.5% net margin) on $808.6M revenue demonstrates operational distress
- High debt burden ($878.2M long-term debt) with inadequate cash reserves ($61.5M) limits financial flexibility and refinancing options
- Minimal net revenue growth (2.6% YoY) insufficient to improve profitability or service debt obligations
Key Metrics to Watch
- Interest coverage ratio and debt covenant compliance—current 0.5x ratio is unsustainable
- Quarterly profitability trajectory and operating margin expansion—current 0.5% is critical threshold
- Free cash flow sustainability and debt reduction progress relative to $878.2M outstanding
Financial Metrics
Revenue
808.6M
Net Income
-4.3M
EPS (Diluted)
$-0.07
Free Cash Flow
30.7M
Total Assets
3.3B
Cash
61.5M
Profitability Ratios
Gross Margin
N/A
Operating Margin
0.5%
Net Margin
-0.5%
ROE
-0.3%
ROA
-0.1%
FCF Margin
3.8%
Balance Sheet & Liquidity
Current Ratio
1.46x
Quick Ratio
1.43x
Debt/Equity
0.65x
Debt/Assets
57.6%
Interest Coverage
0.50x
Long-term Debt
878.2M
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: 2026-05-09T07:20:34.676502 |
Data as of: 2026-03-31 |
Powered by Claude AI