Breaking Down Friedman Industries, Incorporated (FRD) Financial Health: Key Insights for Investors

You're defintely right to pause when you first look at Friedman Industries, Incorporated's full fiscal year 2025 data. The headline numbers were tough, showing net earnings plummeted from $17.3 million in fiscal year 2024 down to just $6.1 million on $444.6 million in sales for fiscal 2025, a clear sign of the pricing pressures in the steel market. But that's old news; the real story is the near-term momentum, so you need to look at the fiscal 2026 first half. The company just posted a sharp turnaround for the second quarter (ended September 30, 2025), with sales of $152.38 million and net income of $2.24 million, proving their strategy of using hedging (risk management with financial instruments like futures) is working to smooth out price volatility. They're also absorbing about $0.9 million in non-recurring costs from the Century Metals & Supplies acquisition in that quarter, but management projects better margins ahead, plus they ended fiscal 2025 with a strong $128.1 million in working capital (the money available to run day-to-day operations). This company is built to capitalize on price cycles.

Revenue Analysis

You need to know where Friedman Industries, Incorporated (FRD)'s money is actually coming from, and the 2025 fiscal year data shows a clear story of segment dominance and price volatility. The direct takeaway is that while the full fiscal year revenue declined, the most recent quarter shows a sharp reversal, driven almost entirely by the Flat-Roll segment and strategic acquisitions.

For the fiscal year ended March 31, 2025, Friedman Industries, Incorporated reported total annual sales of approximately $444.6 million. This figure represents a notable year-over-year revenue decrease of about 13.9% compared to the $516.3 million recorded in fiscal year 2024. That's a significant drop, but it was largely a result of challenging steel price trends during the first three quarters of the year.

Friedman Industries, Incorporated operates with two primary revenue streams: the Flat-Roll segment and the Tubular segment. The Flat-Roll segment, which includes coil processing, is the undisputed heavyweight, consistently driving the vast majority of sales. Honestly, it's the only segment that truly moves the needle for the company's top line.

• Flat-Roll: Coil processing and sales.
• Tubular: Pipe manufacturing and sales.

The segment contribution for the fiscal year ending March 2025 highlights this imbalance. The Coil (Flat-Roll) segment accounted for approximately 90.92% of total annual revenue, leaving the Tubular segment to contribute only about 9.08%. This concentration means you should pay close attention to the flat-roll steel market dynamics, as they are the primary risk and opportunity driver.

Here's the quick math on the two segments for the full fiscal year and the most recent quarter (Q2 2025, ended September 30, 2025):

What this estimate hides is the significant near-term momentum. While the annual number was down, the second quarter of fiscal 2026 (Q2 2025 in the search results) saw sales jump to $152.4 million, a 43% increase year-over-year. This recent surge was bolstered by a 35% increase in steel prices during the fourth quarter of fiscal 2025, which helped improve margins after a rough start to the year. Also, the new Sinton, Texas facility reaching full capacity and the successful integration of the Century Metals & Supplies acquisition are clear tailwinds, expanding the product portfolio and geographic reach. To be fair, the company's overall strategy is detailed here: Mission Statement, Vision, & Core Values of Friedman Industries, Incorporated (FRD).

The key action for you is to monitor the Flat-Roll segment's average selling price per ton. In Q2 2025, that price increased from approximately $858 per ton to approximately $963 per ton year-over-year, which is defintely a positive sign for margin expansion.

Profitability Metrics

You want to know if Friedman Industries, Incorporated (FRD) is making money efficiently, and the short answer for the 2025 fiscal year is: their margins are razor-thin, especially when benchmarked against the broader industry. The company managed to net $6.1 million on sales of $444.6 million for the year ended March 31, 2025, which is a significant drop from the prior year. That's the key takeaway.

Here's the quick math on the core profitability ratios (margins), comparing the cost of goods sold (COGS) and all other overhead to the revenue generated. This shows us how much profit is squeezed out of every dollar of sales.

• Gross Profit Margin: 5.00%
• Net Profit Margin: 1.37%

A 5.00% Gross Profit Margin means only five cents of profit are left from every dollar of sales after paying for the steel and direct production costs (Cost of Goods Sold of $422.35 million). This is defintely a tight spot for a metal processor. For comparison, the Primary Metal Industries average Gross Margin in 2024 was around 17.2%, showing FRD is operating at a substantial disadvantage in raw cost management or pricing power.

Operational Efficiency: The Cost-to-Profit Squeeze

The real story of operational efficiency lies in the gap between the Gross Profit and the Net Profit. The company's Gross Profit for FY2025 was $22.25 million. After subtracting all the Selling, General, and Administrative (SG&A) expenses, interest, and taxes, the Net Income finished at just $6.1 million. This means roughly $16.15 million in operating and non-operating costs eroded nearly 73% of the Gross Profit.

While the full-year Operating Profit is not explicitly detailed in the summary results, this massive cost consumption points to a high operating expense base or a one-time non-operating hit. The industry average Operating Margin (Return on Sales) for Primary Metal Industries was 8.1% in 2024, which is significantly higher than FRD's implied operating margin, suggesting cost management is a major headwind.

You need to see a concerted effort to reduce SG&A or a substantial increase in gross margin to bring operating profitability in line with peers. The new Sinton, Texas facility reaching full capacity is a positive operational signal, as the CEO noted it contributed the highest profit margin among all facilities, but its full impact is still being absorbed by the corporate cost structure.

Profitability Trends and Near-Term Risks

The trend in profitability is a major concern. The 1.37% Net Profit Margin in FY2025 is a sharp decline from the prior year's performance. In the 2024 fiscal year, Friedman Industries, Incorporated reported Net Earnings of $17.3 million on sales of $516.3 million, translating to a healthier 3.35% Net Profit Margin.

The 59% drop in Net Income year-over-year, despite steady sales volume, highlights the volatility inherent in the steel processing business. This volatility is tied directly to fluctuating steel prices, which the company attempts to manage with hedging (a financial strategy to offset risk). The challenge is clear:

• Price Volatility: Steel prices increased 35% in Q4 2025, which helped margins, but the first three quarters faced a difficult margin environment.
• Margin Compression: The Net Profit Margin of 1.37% is far below the Primary Metal Industries' average of 4.7% in 2024.
• Actionable Insight: Watch for margin stability in the upcoming quarters, as management indicated improved margins are anticipated following the difficult first three quarters of fiscal 2025.

The focus moving forward must be on sustaining the margin improvement seen in the final quarter of fiscal 2025. For a deeper look at the company's long-term strategy that guides these operational decisions, you can review their foundational documents here: Mission Statement, Vision, & Core Values of Friedman Industries, Incorporated (FRD).

Debt vs. Equity Structure

When you look at how Friedman Industries, Incorporated (FRD) funds its operations and growth, the picture is one of thoughtful, conservative leverage. For a capital-intensive business like steel processing, a low Debt-to-Equity (D/E) ratio is a sign of financial strength, and Friedman Industries, Incorporated defintely delivers here.

The company primarily uses equity funding, keeping its reliance on outside financing low compared to its peers. As of September 30, 2025, the company reported Stockholders' Equity of $139.3 million. The total interest-bearing debt, which is the core of their leverage, is a mix of revolving credit and a recent acquisition note.

Here's the quick math on their leverage:

• Total Stockholders' Equity (Sep 30, 2025): $139.3 million
• ABL Facility Balance (Short-term/Revolving Debt, Sep 30, 2025): Approximately $83.5 million
• Seller's Note (Long-term Debt, Aug 2025): $3.5 million

Using the most current, specific figures for interest-bearing debt and equity, the Debt-to-Equity ratio for Friedman Industries, Incorporated sits around 0.62 ($87.0M / $139.3M). That's a very healthy number.

Debt-to-Equity: A Conservative Edge

A D/E ratio of 0.62 means that for every dollar of shareholder equity, the company has about 62 cents of debt. This is significantly lower than the broader Basic Materials sector average, which often hovers around 1.40 (or 140%). Even compared to major US steel peers, whose D/E ratios are often in the 0.37 to 0.42 range, Friedman Industries, Incorporated maintains a manageable, if slightly higher, level of leverage, especially after recent activity.

The low D/E ratio is a key indicator of balance sheet stability, giving the company a large cushion to absorb cyclical downturns in the steel market. It also means they have considerable capacity to take on new debt for strategic growth, like the recent acquisition, without straining their financial health.

Recent Financing and Strategic Moves

The company's recent debt activity is tied directly to its growth strategy, which is a good use of leverage. In August 2025, Friedman Industries, Incorporated completed the acquisition of Century Metals & Supplies. This transaction involved issuing a $3.5 million seller's note, which is a manageable piece of long-term debt.

More importantly, they renewed their Asset-Based Lending (ABL) Facility, which is their primary source of short-term liquidity. As of September 30, 2025, the balance on this revolving credit was approximately $83.5 million at an applicable interest rate of 5.8%. This facility is crucial for managing working capital-buying raw steel coils and funding inventory-in a commodity business. This August 2025 refinancing solidified their near-term liquidity, giving them a strong capital foundation for future growth initiatives, which you can learn more about in the Mission Statement, Vision, & Core Values of Friedman Industries, Incorporated (FRD).

The company is clearly balancing its need for working capital debt with a desire to maintain a strong equity base. It's a low-risk approach that prioritizes long-term stability over aggressive, debt-fueled expansion. You should monitor the ABL balance, since it can fluctuate with steel prices, but the overall structure is sound.

Liquidity and Solvency

You need to know if Friedman Industries, Incorporated (FRD) has the cash to cover its near-term obligations, and honestly, the picture is a bit mixed, which is common in the cyclical steel industry. The company's overall liquidity position looks very strong on paper, but a deeper dive into the cash flow statement shows some pressure points you should watch. Their ability to meet short-term debts is defintely there, but they are using financing to cover operations and capital expenditures.

The standard measures of liquidity-the Current Ratio and Quick Ratio-show immediate strength. As of the end of the 2025 fiscal year (FY 2025), Friedman Industries, Incorporated's Current Ratio stood at approximately 3.9. This means the company has $3.90 in current assets for every $1.00 in current liabilities, which is excellent. Even better, the Quick Ratio (or Acid-Test Ratio), which excludes inventory-often the least liquid current asset-was a solid 1.34 for the period ending March 2025. Anything over 1.0 is generally good; this number suggests they can cover all their immediate debts even if they couldn't sell a single piece of steel inventory quickly.

• Current Ratio: 3.9 (Strong short-term coverage).
• Quick Ratio: 1.34 (Solid ability to pay without selling inventory).
• Working Capital: Approximately $107 million (Q3 FY 2025).

Working Capital and Cash Flow Trends

The working capital balance was approximately $107 million as of the end of the third quarter of FY 2025 (December 31, 2024), reflecting a healthy buffer. However, looking at the cash flow statement reveals where the money is actually moving. For the full FY 2025, the company reported a negative Cash Flow From Operating Activities (OCF) of -$4.41 million. This is a critical point: the core business activities did not generate enough cash to sustain themselves over the full year, though they did report a positive OCF of approximately $2.7 million in Q3 FY 2025. Still, the annual number is the one that matters most for the big picture.

Here's the quick math on the full-year cash flow:

The negative OCF, plus the -$3.43 million used for Investing Activities (ICF), meant Friedman Industries, Incorporated had to rely on Financing Activities (+$6.09 million) to cover the shortfall and fund capital expenditures. This is a classic sign of a company managing a tight spot, funding operations and growth with external capital. This is why the Free Cash Flow (FCF) was also negative at -$9.41 million for the year. A business can't sustain negative FCF forever.

Near-Term Liquidity Concerns and Strengths

The main strength is the company's access to capital and its balance sheet structure. Friedman Industries, Incorporated has a $150 million asset-based lending facility (ABL Facility) which matures in May 2026 and is secured by company assets. This facility, plus their current cash position, should be adequate to fund expected cash requirements for the next 12 months. The company's debt was also reduced by 9% during Q3 FY 2025, showing improved financial discipline.

The concern, however, is the trend in cash on the balance sheet. The ratio of cash to total capital hit a 5-year low of 0.8% in March 2025, down from a peak of 28.4% in 2021. This tells you that while the liquidity ratios are high due to inventory and receivables, the actual cash cushion is shrinking. The high Quick Ratio is a strength, but the negative OCF is a clear risk. If you want to dive deeper into the full picture, you can read the full post: Breaking Down Friedman Industries, Incorporated (FRD) Financial Health: Key Insights for Investors.

Finance: Monitor the OCF trend closely in the next two quarters.

Valuation Analysis

You're looking at Friedman Industries, Incorporated (FRD) and wondering if the recent stock surge has pushed it past its fair value. The quick answer, based on a blend of traditional metrics and growth-focused models, is that the stock appears undervalued right now, despite its strong 12-month run. A simple Peter Lynch Fair Value calculation, for example, suggests a fair price of $30.26 as of mid-November 2025, which gives a significant upside from the recent market price of around $22.62.

Key Valuation Ratios: A Mixed Signal

When we look at the core valuation ratios-the classic tools of the trade-Friedman Industries, Incorporated presents a nuanced picture. Its Price-to-Earnings (P/E) ratio, which compares the current share price to its per-share earnings, has been running around 18.85 as of November 2025. This is in line with or slightly below the broader market, suggesting it's not wildly overbought on an earnings basis. Honestly, for a company that has shown recent earnings volatility, this P/E is defintely something to watch.

Here's the quick math on the other key metrics from the fiscal year 2025 data:

• Price-to-Book (P/B) Ratio: At 0.81, this is a compelling number. A P/B below 1.0 means you are essentially buying the company for less than the net value of its assets (Book Value) on the balance sheet.
• Enterprise Value-to-EBITDA (EV/EBITDA): This ratio, which measures the total value of the company (Enterprise Value) against its operating profitability (Earnings Before Interest, Taxes, Depreciation, and Amortization), sits at 11.04. This is a reasonable multiple for the Industrials sector, not signaling an extreme premium.

Stock Price Momentum and Dividend Health

The stock's recent performance has been strong. Over the last 12 months, the stock price has seen a remarkable increase of 45.06%, moving from a 52-week low of $12.24 to a high of $23.50 in November 2025. This kind of momentum is great, but it's what often makes investors nervous about a potential peak.

Still, the dividend picture is healthy. The annualized dividend is $0.16 per share, resulting in a modest dividend yield of about 0.80%. More importantly, the Payout Ratio-the percentage of earnings paid out as dividends-is very low, around 9.81%. This tells you the dividend is extremely sustainable, giving the company plenty of room to reinvest in the business or raise the payout later. That's a sign of management confidence and fiscal prudence.

Analyst Consensus and Next Steps

The Wall Street consensus on Friedman Industries, Incorporated is currently a Hold rating. This is often driven by the steel industry's cyclical nature and the recent run-up in the stock price, which makes analysts cautious about recommending a strong 'Buy' at these levels. To be fair, one analyst did upgrade the stock to a 'Strong-Buy' in August 2025, but the overall picture is one of measured caution. The P/B ratio is a strong argument for value, but the P/E suggests the market is pricing in some near-term earnings stability.

Your next step should be to dig into the quality of those earnings and the company's competitive position. You can start by reading more about the institutional interest in the company: Exploring Friedman Industries, Incorporated (FRD) Investor Profile: Who's Buying and Why?

Risk Factors

You're looking at Friedman Industries, Incorporated (FRD) and seeing a company that closed fiscal year 2025 with strong sales volume but a significant drop in net earnings. That drop-from approximately $17.3 million in fiscal 2024 to just $6.1 million in fiscal 2025-tells you the core risks are real, and they center on market volatility and operational execution.

External and Industry Risks: The Steel Price Rollercoaster

The biggest external risk for Friedman Industries, Incorporated (FRD) is the wild swing in commodity pricing. Operating results are fundamentally tied to the price of steel, which is notoriously volatile. This is a classic cyclical industry risk. For instance, while the company saw a 35% increase in steel prices during the fourth quarter of fiscal 2025, which helped margins, the overall fiscal year results show that the average selling price for their products decreased compared to the prior year.

This market condition is a constant headwind, but FRD does have a clear mitigation plan: hedging. They use derivative instruments, specifically hot-rolled coil futures and swaps, to manage this exposure. This strategy was defintely effective in fiscal 2025, generating a total hedging gain of approximately $7.6 million. That gain helped stabilize results in a tough pricing environment.

• Commodity Pricing Exposure: Steel price volatility directly impacts net earnings.
• Supply Concentration: Reliance on a limited number of flat-roll and tubular suppliers.

Operational and Strategic Risks: Execution and Integration

Looking at the internal side, two key areas demand your attention: operations and strategy. On the operational front, any manufacturing business faces downtime risk. Friedman Industries, Incorporated (FRD) noted that equipment downtime was expected to cause a slightly lower sales volume for the first quarter of fiscal 2026. This is a near-term risk that hits revenue directly. Also, the company faces a concentration of supply risk; losing one of their limited flat-roll or tubular suppliers could materially hurt their ability to service customers.

Strategically, the recent acquisition of Century Metals & Supplies, completed on August 29, 2025, introduces integration risk. Any time you buy a company, you're betting on a smooth transition of systems, culture, and supply chains. This process requires significant oversight. Plus, the acquisition has financial implications, which brings us to the balance sheet. For a deeper dive into the company's long-term direction, you should check out the Mission Statement, Vision, & Core Values of Friedman Industries, Incorporated (FRD).

Financial Risks: Increased Leverage and Inventory

The balance sheet shows a clear increase in financial risk, largely tied to the acquisition. Total liabilities have grown, mainly due to increased use of the Asset-Based Lending (ABL) facility. As of the September 30, 2025 quarter, the ABL facility draw increased to $83.5 million, up from $47.7 million at the end of fiscal 2025. Here's the quick math: more debt means higher interest expense, which totaled $1.4 million year-to-date for fiscal 2026.

Another financial risk is the sharp inventory build. Inventory rose to $161.6 million as of September 30, 2025, up from $113.7 million at the end of fiscal 2025, with flat-roll inventory alone accounting for $140.7 million of the September 2025 total. This is a double-edged sword: it supports higher sales volume, but a sudden drop in steel prices could force a painful write-down of that inventory value. You need to watch that inventory-to-sales ratio closely.

Growth Opportunities

You're looking for a clear map of where Friedman Industries, Incorporated (FRD) goes from here, especially after a solid fiscal 2025. The direct takeaway is this: the company is shifting from a pure steel processor to a more diversified metal solutions provider, and that's a powerful move. Their growth hinges on recent strategic acquisitions and relentless operational efficiency, not just the cyclical steel market.

For fiscal year 2025, Friedman Industries, Incorporated reported sales of approximately $444.6 million and net earnings of about $6.1 million. That's the baseline. The real growth story starts in fiscal 2026, driven by a major product innovation: acquisition.

Acquisition-Fueled Market Expansion

The biggest near-term catalyst is the acquisition of Century Metals & Supplies, completed in August 2025. This wasn't just buying volume; it was a strategic expansion of their product portfolio to include non-ferrous materials, which helps diversify revenue away from pure steel volatility. Plus, it immediately expanded their geographic footprint, giving them a stronger presence in the southeastern U.S. and a new gateway into the Latin American market.

This is a defintely a game-changer for their scale. The impact was immediate: Q2 fiscal 2026 (ended September 30, 2025) sales surged to $152.4 million, a 43% year-over-year increase.

• Diversify product with non-ferrous materials.
• Expand into southeastern U.S. and Latin America.
• Add coil slitting and processing capabilities.

Near-Term Revenue and Earnings Estimates

Management's outlook for Q3 fiscal 2026 is a strong indicator of sustained momentum. They project that sales volume will remain consistent with the record Q2 levels, even with the typical holiday slowdown, because the new capacity from the Century Metals acquisition will offset it.

More importantly, they anticipate a modest improvement in margins quarter-over-quarter. This margin growth is crucial, and it's expected to be driven by anticipated increases in metals pricing. Here's the quick math on the Q2 2026 flat-roll segment: it generated $143.3 million in revenue, reflecting a 31% increase in tons sold and a 12% rise in average selling prices. That's pricing power.

Durable Competitive Advantages

Friedman Industries, Incorporated isn't just riding a steel cycle; they have structural advantages. Their core competitive edge is operational efficiency and a disciplined approach to capital allocation.

They've shown a remarkable ability to expand margins through cost optimization. For example, in Q1 2026, they achieved a 5.8 percentage point improvement in gross margin for their flat-roll segment by reducing the cost of materials sold as a percentage of revenue. Also, their newest facility in Sinton, Texas, reached full capacity in fiscal 2025, which provides a high-margin base of operations. Finally, their financial hedging capabilities are a huge differentiator in a volatile commodity market. They successfully recognized a total hedging gain of approximately $7.6 million in fiscal 2025, which helped them overcome price volatility and expand profitable results.

You can learn more about who is betting on this turnaround story by Exploring Friedman Industries, Incorporated (FRD) Investor Profile: Who's Buying and Why?