HEXCEL CORP /DE/ (HXL) Stock Analysis
HEXCEL CORP /DE/ (HXL) Stock Analysis
Overall Grade: F (Concerning)
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HEXCEL CORP /DE/ faces challenges in financial performance that warrant careful analysis.
Key Metrics:
| Metric | Value | Context |
|---|---|---|
| ROIC | 5.9% | Below expectations |
| FCF Margin | 8.3% | Healthy cash flow |
| Debt/Equity | 0.8x | Moderate leverage |
Investment Thesis: Financial metrics indicate concerning business quality with areas requiring attention.
What is HEXCEL CORP /DE/'s Profitability and ROIC?
HEXCEL CORP /DE/'s return on invested capital of 5.9% is below the typical cost of capital. Gross margin of 23.0% with operating margin at 9.1% reflects the company's moderate market position.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 5.9% | Warning | Below cost of capital |
| Return on Equity (ROE) | 7.2% | Warning | Moderate equity returns |
| Gross Margin | 23.0% | Adequate | Competitive pricing environment |
| Operating Margin | 9.1% | Adequate | Moderate operational efficiency |
How Strong is HEXCEL CORP /DE/'s Cash Flow Quality?
HEXCEL CORP /DE/ generated $157.2M in free cash flow over the trailing twelve months, representing a 8.3% margin. Cash earnings quality is strong, with operating cash flow exceeding net income by 2.1x.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Free Cash Flow Margin | 8.3% | Adequate | Healthy cash generation |
| Free Cash Flow (TTM) | $157.2M | Good | Positive cash generation |
| OCF/Net Income | 2.1x | Excellent | High earnings quality |
| FCF Consistency (8Q) | N/A | Warning | Variable cash flow |
What is HEXCEL CORP /DE/'s Financial Health?
HEXCEL CORP /DE/'s debt-to-equity ratio of 0.8x indicates moderate leverage.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| Debt to Equity | 0.8x | Adequate | Moderate leverage |
| Net Cash Position | $-922.0M | Adequate | Net debt position |
Is HEXCEL CORP /DE/ Stock Overvalued or Undervalued?
HEXCEL CORP /DE/ trades at a P/E of 53.7x, representing a premium to the sector median of N/A. Free cash flow yield of 2.7% reflects market expectations for growth.
Key Metrics
| Metric | Value | Rating | Interpretation |
|---|---|---|---|
| P/E Ratio | 53.7x | Warning | Premium valuation |
| EV/Sales | 3.5x | Good | Growth premium priced in |
| FCF Yield | 2.7% | Adequate | Lower cash yield |
| Dividend Yield | 0.9% | Adequate | Growth focus over income |
Sector Rankings
| Metric | Value | Percentile | vs Median |
|---|---|---|---|
| Return on Invested Capital (ROIC) | 5.9% | Bottom 50% | 0.9x below |
| Free Cash Flow Margin | 8.3% | Top 50% | 9.9x above |
| Gross Margin | 23.0% | Bottom 50% | 0.9x below |
| Operating Margin | 9.1% | Top 50% | 1.1x above |
| Return on Equity (ROE) | 7.2% | Bottom 50% | 0.9x below |
| P/E Ratio | 53.7x | N/A | - |
Rating Thresholds
Return on Invested Capital (ROIC)
Measures how efficiently a company uses its debt and equity capital to generate profits. ROIC above 15% typically indicates a competitive moat.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Exceptional capital efficiency, strong competitive moat |
| Good | 12% - 20% | Above-average returns, sustainable competitive position |
| Adequate | 8% - 12% | Around cost of capital, moderate competitive position |
| Warning | 4% - 8% | Below cost of capital, value may be eroding |
| Red flag | < 4% | Significant capital destruction, fundamental issues |
Current: 5.9% (Warning - Bottom 50% of sector (median: 6.8%))
Free Cash Flow Margin
The percentage of revenue converted to free cash flow. Higher margins indicate stronger cash generation and business quality.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 20% | Strong cash generation, high-quality business |
| Good | 10% - 20% | Healthy cash conversion |
| Adequate | 5% - 10% | Moderate cash generation |
| Warning | 0% - 5% | Thin cash margins, capital intensive |
| Red flag | < 0% | Cash burn, potential liquidity concerns |
Current: 8.3% (Adequate - Top 50% of sector (median: 0.8%))
Gross Margin
Revenue minus cost of goods sold as a percentage. Higher gross margins indicate pricing power and competitive advantage.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 50% | Strong pricing power and competitive moat |
| Good | 30% - 50% | Healthy margins, differentiated product |
| Adequate | 20% - 30% | Moderate margins, competitive industry |
| Warning | 10% - 20% | Thin margins, commodity-like business |
| Red flag | < 10% | Very thin margins, structural challenges |
Current: 23.0% (Adequate - Bottom 50% of sector (median: 25.8%))
Debt to Equity Ratio
Total debt divided by shareholders' equity. Lower ratios indicate more conservative financing and reduced financial risk.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 0.3x | Conservative leverage, strong balance sheet |
| Good | 0.3x - 0.7x | Moderate leverage, healthy financial position |
| Adequate | 0.7x - 1.5x | Elevated leverage, monitor closely |
| Warning | 1.5x - 3.0x | High leverage, increased financial risk |
| Red flag | > 3.0x | Excessive leverage, potential distress risk |
Current: 79.4% (Adequate)
P/E Ratio (Price-to-Earnings)
Stock price divided by earnings per share. Lower P/E may indicate undervaluation, while higher P/E suggests growth expectations.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | < 15x | Attractively valued, potential opportunity |
| Good | 15x - 25x | Fair value for quality company |
| Adequate | 25x - 35x | Growth premium, justify with earnings growth |
| Warning | 35x - 50x | High expectations priced in |
| Red flag | > 50x or negative | Speculative valuation or losses |
Current: 53.7x (Warning)
Free Cash Flow Yield
Free cash flow per share divided by stock price. Higher FCF yield indicates better cash return relative to valuation.
| Rating | Range | Interpretation |
|---|---|---|
| Excellent | > 8% | High cash return, potential value opportunity |
| Good | 5% - 8% | Solid cash yield |
| Adequate | 3% - 5% | Moderate cash return |
| Warning | 1% - 3% | Low cash yield, growth expectations |
| Red flag | < 1% | Minimal cash return to shareholders |
Current: 2.7% (Warning)
Frequently Asked Questions
Q: What is HEXCEL CORP /DE/'s Return on Invested Capital (ROIC)?
HEXCEL CORP /DE/ (HXL) has a trailing twelve-month Return on Invested Capital (ROIC) of 5.9%. This compares below the sector median of 6.8%. An ROIC below 8% suggests the company may be destroying shareholder value.
Q: What is HEXCEL CORP /DE/'s Free Cash Flow Margin?
HEXCEL CORP /DE/ (HXL) has a free cash flow margin of 8.3%, generating $157.2 million in free cash flow over the trailing twelve months. A FCF margin between 5-10% is typical for capital-intensive businesses.
Q: Is HEXCEL CORP /DE/ stock overvalued or undervalued?
HEXCEL CORP /DE/ (HXL) trades at a P/E ratio of 53.7x, which is above the sector median of N/A. The EV/Sales multiple is 3.5x. Free cash flow yield is 2.7%, reflecting growth expectations priced into the stock.
Q: Does HEXCEL CORP /DE/ pay a dividend?
HEXCEL CORP /DE/ (HXL) currently pays a dividend yield of 0.9%. Including share buybacks, the total shareholder yield is 8.7%. The relatively low yield suggests the company prioritizes growth reinvestment over income distribution.
Q: How much debt does HEXCEL CORP /DE/ have?
HEXCEL CORP /DE/ (HXL) has a debt-to-equity ratio of 0.8x with total debt of $993.0 million. Net debt position is $922.0 million.
Q: What is HEXCEL CORP /DE/'s revenue and earnings growth?
HEXCEL CORP /DE/ (HXL) declined revenue by 0.5% year-over-year. Earnings per share decreased by 14.0% compared to the prior year. Revenue decline may indicate market challenges or industry headwinds.
Q: Is HEXCEL CORP /DE/ buying back stock?
HEXCEL CORP /DE/ (HXL) repurchased $454.3 million of stock over the trailing twelve months. This represents a buyback yield of 7.7%.
Q: How does HEXCEL CORP /DE/ compare to competitors in Materials?
Compared to other companies in Materials, HEXCEL CORP /DE/ (HXL) shows: ROIC of 5.9% is below the sector median of 6.8% (Bottom 47%). FCF margin of 8.3% exceeds the sector median of 0.8% (Top 27% of sector). Gross margin at 23.0% is 2.9 percentage points lower than sector peers. These rankings are based on MetricDuck's analysis of all Materials companies with available SEC filings.
Q: What warning signs should I watch for with HEXCEL CORP /DE/?
HEXCEL CORP /DE/ (HXL) shows no major financial warning signs based on current metrics. However, investors should always monitor: 1) Margin compression trends, 2) Cash flow consistency, 3) Debt levels relative to cash generation, and 4) Changes in competitive positioning.
Data Source: Data sourced from 10-Q filed 2025-10-22. TTM metrics as of Q4 2025.
Methodology: Financial metrics calculated from SEC 10-K and 10-Q filings using standardized formulas. Sector comparisons use peer group based on SIC code.
This analysis is for informational purposes only and does not constitute investment advice.