Investment Thesis
Willdan Group demonstrates concerning fundamentals masked by topline revenue growth. Despite 20.5% YoY revenue increase, the company generated negative operating cash flow of -$24.4M and negative free cash flow of -$26.4M, indicating earnings quality issues and sustainability concerns. Thin operating margins (4.7%) combined with net income flat YoY and very low returns (ROE 2.7%, ROA 1.7%) suggest growth is not translating to profitable, cash-generating operations.
Strengths
- Strong revenue growth of 20.5% YoY
- Healthy gross margin of 40.7%
- Conservative balance sheet with low leverage (Debt/Equity 0.15x) and adequate liquidity (Current Ratio 1.68x)
Risks
- Critical: Negative operating cash flow of -$24.4M and negative free cash flow of -$26.4M despite positive net income signals earnings quality deterioration
- Net income essentially flat YoY (0.0%) despite 20.5% revenue growth indicates poor profitability conversion and margin compression
- Very thin operating margin (4.7%) and weak returns on capital (ROE 2.7%, ROA 1.7%) leave minimal financial flexibility
- Interest coverage of 1.9x and cash burn rate threaten liquidity sustainability given only $28.3M in cash reserves
Key Metrics to Watch
- Operating cash flow trend - must urgently turn positive to validate earnings quality
- Free cash flow margin - currently -17.0%, indicates structural profitability issues
- Working capital dynamics - negative cash flow despite positive earnings suggests collection or inventory management problems
- Operating margin expansion - critical to demonstrate pricing power and cost control
- Cash runway - at current burn rate, existing cash reserves are at risk
Financial Metrics
Revenue
155.1M
Net Income
8.5M
EPS (Diluted)
$0.55
Free Cash Flow
-26.4M
Total Assets
511.7M
Cash
28.3M
Profitability Ratios
Gross Margin
40.7%
Operating Margin
4.7%
Net Margin
5.5%
ROE
2.7%
ROA
1.7%
FCF Margin
-17.0%
Balance Sheet & Liquidity
Current Ratio
1.68x
Quick Ratio
1.68x
Debt/Equity
0.15x
Debt/Assets
39.3%
Interest Coverage
1.88x
Long-term Debt
47.9M
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: 2026-05-09T13:51:55.513360 |
Data as of: 2026-04-03 |
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