Breaking Down Garrett Motion Inc. (GTX) Financial Health: Key Insights for Investors

You're looking at Garrett Motion Inc. (GTX) and trying to figure out if their traditional turbocharging strength can truly fund their zero-emission future, and honestly, the 2025 numbers make a compelling case for operational excellence.

Management has raised its full-year outlook, now projecting net sales of $3.55 billion and a solid $385 million in Adjusted Free Cash Flow (FCF), which is the real engine here. That cash generation is defintely translating to shareholder value, as seen by the recent boost in the quarterly dividend to $0.08 per share.

Here's the quick math: they're converting earnings into cash while simultaneously securing over $1 billion in light vehicle turbo program extensions, which provides near-term revenue visibility. But still, what this estimate hides is the persistent debt-to-equity ratio of -1.88 and an Altman Z-Score that flags potential financial distress, a critical point you can't ignore when mapping their long-term transition.

We need to break down how they plan to navigate that leverage while funding their E-Powertrain and E-Cooling growth.

Revenue Analysis

You want to know where Garrett Motion Inc. (GTX) is actually making its money, and the short answer is: the Original Equipment Manufacturers (OEMs) still drive the bus, but the shift to new power sources is becoming a real revenue line. For the full fiscal year 2025, the company has raised its net sales outlook, targeting a midpoint of approximately $3.55 billion. That's a solid number, reflecting a stronger-than-expected second half in the automotive industry.

The core of Garrett Motion Inc.'s revenue remains turbochargers and related components sold directly to car manufacturers-Original Equipment Manufacturers (OEMs). In the latest quarterly breakdown (Q3 2025), this segment accounted for a dominant 84.14% of total revenue. This concentration is a double-edged sword: it means deep integration with major automakers, but it also ties their top line directly to global vehicle production volumes, which can be volatile. The other major piece is the Aftermarket segment, which provides replacement parts and makes up about 14.16% of sales.

Here's the quick math on the near-term trend: Q3 2025 net sales hit $902 million, a 9% increase year-over-year on a reported basis. That growth was primarily fueled by higher demand in core products, especially gasoline applications, which saw a 10% sales jump during the quarter. Still, you can't ignore the drag from the Aftermarket, where sales showed continued weakness.

The geographical split shows a clear global footprint, which helps diversify risk, but Europe remains the largest single region. To be fair, a truly global business is defintely more complex to manage.

The most important change to watch is the emerging technology revenue. Garrett Motion Inc. is actively securing new business that maps to the future of mobility. They won several new light vehicle turbo programs, including awards for range-extended electric vehicles (REEVs), and are seeing growing interest in their E-Powertrain and E-Cooling technologies. Plus, they are diversifying outside of passenger vehicles. New commercial vehicle and industrial awards, such as those for gensets (stationary power generation), are expected to contribute over $100 million in sales in 2025 alone. This is a smart hedge against the long-term decline of pure internal combustion engines. You can read more about their strategic focus on zero-emission technologies in their Mission Statement, Vision, & Core Values of Garrett Motion Inc. (GTX).

What this estimate hides is the constant currency growth, which was a more modest 6% in Q3 2025 due to favorable foreign currency translation. So, while the headline number is strong, a portion of the gain is currency-related, not just pure volume or price increase. The key action for you is to monitor the revenue growth trajectory of the non-OEM segments, specifically the E-Powertrain and industrial awards, as these will be the engines of long-term sustainable growth.

Profitability Metrics

You want to know if Garrett Motion Inc. (GTX) is actually making money and how efficiently. The short answer is yes, and their margins are significantly stronger than the industry average, which is a clear sign of operational discipline and a differentiated product mix.

Looking at the Trailing Twelve Months (TTM) data up to the most recent quarter in 2025, Garrett Motion Inc. shows robust profitability. Their Gross Margin stands at 20.58%, their Operating Margin is 14.39%, and their Net Profit Margin is 9.22%. These figures are the bedrock of their financial health, especially when you consider the volatility in the broader automotive sector.

• Gross Margin: 20.58% (TTM)
• Operating Margin: 14.39% (TTM)
• Net Profit Margin: 9.22% (TTM)

Operational Efficiency and Cost Management

Garrett Motion Inc.'s operational efficiency is defintely a bright spot. The high Operating Margin of 14.39% shows they are managing their Selling, General, and Administrative (SG&A) costs extremely well relative to their gross profit. Here's the quick math: in Q1 2025, they reported a gross profit of $179 million, and a key driver was $16 million in productivity net of labor inflation, plus $9 million from commodity and energy deflation. That's smart cost control in a tough environment.

Still, the trend isn't perfectly linear. The Gross Profit Margin actually saw a slight dip in Q2 2025 to 19.8% from 20.8% year-over-year, primarily due to a $25 million impact from an unfavorable product mix. This suggests that while cost management is strong, the shift in sales mix-like the continued dominance of lower-margin gasoline turbo sales-can still pressure the top line profitability.

Profitability Ratios Versus the Industry

To be fair, you need to compare Garrett Motion Inc. to its peers in the US Auto Components industry. The comparison clearly highlights Garrett Motion Inc.'s competitive advantage, which is likely tied to its specialized turbocharging and new e-powertrain technologies. Their margins are not just better; they are in a different league.

The company's TTM Net Profit Margin of 9.22% is more than double the industry average of 3.66%. This kind of gap signals a strong moat (competitive advantage) or superior cost structure. You can see the full picture in the table below, which maps Garrett Motion Inc.'s TTM performance against the sector:

The Operating Margin difference is particularly striking: 14.39% for Garrett Motion Inc. versus 4.31% for the industry. That's a massive operational outperformance. This is why their stock's Price-to-Earnings (P/E) ratio of 10x, which is below the industry average of 18.2x, is a key talking point for value investors-the market is still cautious despite the strong numbers. For a deeper dive into the valuation and strategic frameworks, you should check out the full post: Breaking Down Garrett Motion Inc. (GTX) Financial Health: Key Insights for Investors.

Debt vs. Equity Structure

You're looking at Garrett Motion Inc. (GTX)'s balance sheet and seeing some numbers that jump out-specifically, a negative shareholder equity. The direct takeaway is that while the company carries a significant debt load, its aggressive refinancing and capital return strategy signal management's confidence in its cash flow generation, which is the real story here.

As of the second quarter of 2025, Garrett Motion Inc. (GTX) reported a total principal amount of debt outstanding of nearly $1.5 billion, specifically $1,491 million. This debt structure is heavily skewed toward the long-term, which is typical for a capital-intensive manufacturing business. The breakdown shows long-term debt and capital lease obligations at approximately $1,503 million, with short-term obligations at a manageable $20 million.

Here's the quick math on the Debt-to-Equity (D/E) ratio: Garrett Motion Inc. (GTX)'s D/E ratio stands at -1.88 as of June 2025. That negative value is a direct result of the company's Total Stockholders Equity being negative, at $-812 million. This isn't a sign of immediate collapse, but rather a legacy of its spin-off and bankruptcy restructuring, which created a deficit in shareholder equity. Still, it's a red flag you defintely need to understand.

To be fair, the industry benchmark for Auto Parts is an average D/E ratio of around 0.59. Garrett Motion Inc. (GTX)'s negative equity position means a direct comparison is meaningless; instead, we must focus on its ability to service that debt and generate cash flow. The company's focus is clearly on debt management and extending its runway.

The company has been proactive in managing its debt profile. In January 2025, Garrett Motion Inc. (GTX) successfully refinanced a significant portion of its debt, securing more favorable terms. This move was smart because it significantly pushed out the maturity wall, reducing near-term liquidity risk:

• Refinanced the existing $692 million term loan.
• Extended the term loan maturity to 2032.
• Upsized the revolving credit facility from $600 million to $630 million.
• Reduced the interest rate by 50 basis points to SOFR plus 225 basis points.

The balance between debt financing and equity funding is interesting. Despite the negative equity, Garrett Motion Inc. (GTX) is actively returning capital to shareholders, which is a strong signal of confidence in its operating cash flow. In the second quarter of 2025 alone, the company repurchased $22 million of common stock, with a remaining repurchase capacity of $198 million as of June 30, 2025. Plus, it declared a quarterly cash dividend of $0.06 per share. This aggressive capital return is a form of equity funding-it reduces the share count, which helps boost earnings per share (EPS), and rewards shareholders directly.

The company is essentially using its strong free cash flow to manage the debt burden while simultaneously rewarding shareholders, a strategy that prioritizes financial flexibility and shareholder value over immediately fixing the balance sheet's negative equity. For a deeper dive into who is betting on this strategy, check out Exploring Garrett Motion Inc. (GTX) Investor Profile: Who's Buying and Why?

Liquidity and Solvency

You want to know if Garrett Motion Inc. (GTX) can cover its near-term bills. The short answer is yes, but it's operating with tight margins on its current assets. As of the third quarter of 2025, the company maintains adequate liquidity, but its balance sheet structure, particularly the debt-to-equity ratio, suggests solvency is the bigger, more complex conversation.

Assessing Garrett Motion Inc.'s Liquidity

A quick look at the liquidity ratios tells you Garrett Motion Inc. is managing its working capital closely. The Current Ratio, which measures short-term assets against short-term liabilities, stood at 1.02 as of September 30, 2025. This is slightly above the 1.0 threshold, meaning current assets just cover current liabilities. The Quick Ratio (or acid-test ratio), which strips out inventory-often the least liquid current asset-was lower at 0.78. This means Garrett Motion Inc. relies on selling inventory to fully meet its immediate obligations.

The good news is the company has a substantial cash cushion. Total available liquidity as of the end of Q3 2025 was $860 million, which includes $230 million in unrestricted cash and cash equivalents, plus $630 million in undrawn commitments under its revolving credit facility. That's a strong buffer against unexpected operational needs.

• Current Ratio: 1.02 (Q3 2025)
• Quick Ratio: 0.78 (TTM Q3 2025)
• Available Liquidity: $860 million (Q3 2025)

Cash Flow and Working Capital Trends

The cash flow statement shows a solid operational engine. For the trailing twelve months (TTM) ending September 30, 2025, Garrett Motion Inc. generated $445 million in net cash from operating activities. This is the lifeblood of the company, and it's robust. The third quarter of 2025 alone saw $100 million in operating cash flow.

Working capital management has been a factor. In Q2 2025, the company saw a favorable impact from working capital changes of $92 million, which helped boost cash flow. However, in Q1 2025, there was an unfavorable impact of $64 million. This quarter-to-quarter volatility in working capital (accounts receivable, inventory, and accounts payable) is something to defintely monitor, but the Q3 2025 results showed a favorable impact of $3 million, suggesting a return to stability.

Near-Term Risks and Capital Allocation

The investing cash flow for the TTM period was a manageable outflow of $42 million, which is normal for a manufacturing business investing in its future. More importantly, the financing activities in Q3 2025 show management is confident in its cash generation. They executed a $50 million voluntary early debt repayment and repurchased $84 million of common stock. That's a strong signal of capital discipline and a commitment to shareholder returns.

Still, you need to look beyond pure liquidity. The company's debt-to-equity ratio sits at -1.88, which flags a high level of leverage (solvency risk) that you can't ignore, even with strong cash flow. This is why the conversation about Exploring Garrett Motion Inc. (GTX) Investor Profile: Who's Buying and Why? is so important-it's about who is comfortable with this risk profile. The company's strong cash flow is currently the primary mitigant for this structural leverage.

Valuation Analysis

You want to know if Garrett Motion Inc. (GTX) is a good value right now, and the simple answer is that based on forward earnings and peer comparison, it looks reasonably priced, leaning toward undervalued. The stock has been on a tear, gaining over 93.500% in the last 52 weeks, but its core valuation multiples for the 2025 fiscal year still suggest room for growth.

The market is pricing Garrett Motion Inc. (GTX) at a trailing Price-to-Earnings (P/E) ratio of about 13.44, but the forward P/E for 2025 drops to approximately 11.78 based on analyst estimates. This forward multiple is below the historical average for the auto parts industry, which tells me the market expects continued earnings growth but hasn't fully factored it into the price yet. That's a good sign for value investors.

• Current P/E Ratio: 13.44
• Forward P/E (2025 Est.): 11.78
• EV/EBITDA (Trailing): 7.23x

Here's the quick math on Enterprise Value to Earnings Before Interest, Taxes, Depreciation, and Amortization (EV/EBITDA): Using a trailing 12-month EBITDA of approximately $602.00 million and an Enterprise Value of about $4.35 billion, the ratio is a healthy 7.23x. This is a solid multiple for a capital-intensive industrial company, suggesting the debt load is manageable relative to its operating cash flow.

Now, let's talk about the Price-to-Book (P/B) ratio. It's currently sitting at a negative multiple, around -3x as of late 2024. This isn't a red flag for a company like Garrett Motion Inc. (GTX), which emerged from bankruptcy restructuring. What this estimate hides is the negative shareholder equity (Book Value) on the balance sheet, a legacy of that restructuring. You can't use P/B to gauge undervaluation here; you have to rely on the P/E and EV/EBITDA multiples.

Stock Performance and Analyst Sentiment

The stock price trend over the last year shows strong momentum. Garrett Motion Inc. (GTX) has traded in a 52-week range between a low of $7.01 and a high of $17.91. With the closing price near $16.08 as of November 21, 2025, the stock is trading close to its 52-week high, reflecting optimism about its pivot to electric-boosting technologies.

The analyst community is defintely bullish. The consensus rating from analysts is a strong Buy. The average 12-month price target is set at $19.13, which implies an upside potential of about 13.57% from the current price. This optimism is grounded in their strong earnings reports, like the Q3 2025 beat where the company reported $0.38 EPS versus a $0.34 consensus.

Garrett Motion Inc. (GTX) also recently increased its quarterly cash dividend to $0.08 per share, which annualizes to $0.32. This gives you a modest but growing dividend yield of approximately 1.9%. The payout ratio is very conservative at about 20.38%, meaning they are reinvesting most of their earnings back into the business, which is exactly what you want to see from a company navigating the automotive industry's electrification transition. For a deeper dive into who is driving this price action, you should read Exploring Garrett Motion Inc. (GTX) Investor Profile: Who's Buying and Why?

Here is a summary of the key valuation and consensus data:

So, the valuation multiples are attractive, the dividend is growing, and the analysts are on board. The risk is less about overvaluation and more about execution on their new electric-boosting product pipeline.

Risk Factors

You're looking at Garrett Motion Inc. (GTX) because the recent Q3 2025 results were strong-net sales hit $902 million with a raised full-year net income forecast of up to $295 million-but you can't ignore the structural risks. The primary challenge isn't today's operational efficiency, which is solid, but the long-term shift away from the internal combustion engine (ICE) that still generates the bulk of their revenue.

Honestly, the biggest risk is the core business becoming obsolete. Here's the quick math: while the company is securing new light vehicle turbo program extensions worth over $1 billion, the global automotive industry is still projecting an average light vehicle battery electric vehicle (BEV) penetration of 16% for 2025. The slow pace of revenue replacement from zero-emission products remains the core strategic risk for investors.

The company is definitely a trend-aware realist, and their mitigation strategy is clear: a 'dual-engine' approach. This means they are aggressively investing in the future while optimizing the present. For 2025, over 50% of their research, development, and engineering (RD&E) spending is targeting zero-emission solutions like the 3-in-1 E-Powertrain and E-Cooling systems. They are also diversifying into industrial applications, expecting to generate over $100 million in industrial sales in 2025, mostly for data center backup power.

• Diesel market decline is structural.
• Aftermarket sales show continued weakness.
• Product mix shift (more gasoline turbo sales) is a margin headwind.

On the financial and operational front, there are near-term fluctuations to watch. For example, net cash provided by operating activities fell significantly year-over-year in Q1 2025 to $56 million, though it rebounded strongly to $100 million in Q3. This kind of volatility, often tied to working capital changes, suggests operational efficiency is still a moving target. Still, their liquidity position is robust, with $860 million available as of Q3 2025, which gives them a healthy buffer to manage these swings and fund the EV transition.

The management team is taking clear actions to de-risk the balance sheet, too. They executed a $50 million voluntary early repayment on their term loan in Q3 2025, which reduces gross leverage and interest expense. They anticipate full-year 2025 adjusted free cash flow of $385 million, with more than 75% of that earmarked for shareholder returns, which is a strong signal of financial discipline. If you want a deeper dive into who is betting on this dual strategy, you should be Exploring Garrett Motion Inc. (GTX) Investor Profile: Who's Buying and Why?

Here is a summary of the key risks and their financial context for the 2025 outlook:

Growth Opportunities

You're looking for where Garrett Motion Inc. (GTX) is going to find its next leg of growth, and the answer is a clear two-pronged strategy: fortifying the core while aggressively building out their Zero-Emission Vehicle (ZEV) portfolio. The company's updated 2025 outlook reflects this strength, with management raising its midpoint forecast for Net Sales to $3.55 billion and Net Income to $280 million. That's a defintely solid performance in a challenging automotive market.

The near-term revenue growth isn't just coming from cars, but also from a smart market expansion into industrial applications. Specifically, their turbochargers are now a critical component for data center backup power generation. Garrett Motion Inc. has already secured over $40 million in expected lifetime revenue from this new segment, and sales from these stationary power products are projected to exceed $100 million in 2025 alone. That's a quick, high-margin diversification play.

Key Growth Drivers and Product Innovation

Garrett Motion Inc.'s growth is powered by its ability to innovate across all powertrain types-not just electric. Their core business remains robust, with strong sales in gasoline turbochargers and new wins in hybrid and range-extended electric vehicle (REV) platforms. This positions them perfectly for the long transition away from pure internal combustion engines (ICE).

The real long-term opportunity, however, lies in their ZEV solutions, which include E-Powertrain, E-Cooling, and fuel cell compressors for hydrogen vehicles. They secured their first major series production award for electric motors in 2025, with production slated to start in 2027. This is the future revenue stream you need to monitor closely.

• Turbochargers for hybrid and REV applications.
• E-Powertrain and E-Cooling for battery electric vehicles.
• Fuel cell compressors for hydrogen vehicles.
• Industrial turbochargers for data center backup power.

Strategic Initiatives and Competitive Edge

The company's competitive advantage (or moat) is rooted in two things: technological leadership and operational discipline. Garrett Motion Inc. operates in a consolidating industry with only two major global players in the high-performance turbocharging space, which gives them a powerful niche market position. Their expertise in both turbocharging and electric boosting technologies sets them apart.

On the operational side, they run a capital-light model, with capital expenditures accounting for just 2.4% of sales in Q3 2025, demonstrating an efficient use of capital. This financial discipline allows them to prioritize shareholder returns. In 2025, the company announced a capital allocation framework aiming to return 75% or more of adjusted free cash flow to shareholders, including a $250 million share repurchase program. That's a strong signal of management's confidence in their cash generation.

In November 2025, Garrett Motion Inc. also expanded its partnership with PTC, adopting their Codebeamer+ (Application Lifecycle Management) and Windchill+ (Product Lifecycle Management) solutions. This is a crucial step for unifying engineering data and accelerating the adoption of artificial intelligence (AI) in product development, which will keep their innovation engine humming. You can see their foundational strategy here: Mission Statement, Vision, & Core Values of Garrett Motion Inc. (GTX).

Here's a quick summary of the 2025 financial outlook, based on the midpoint of the raised guidance:

The company's focus on operational excellence is evident in its Q3 2025 adjusted EBITDA margin, which improved to 17.4% from 15.8% a year prior. They are squeezing more profit out of every dollar of sales.