The Agriculture Technology sector credit profile has remarkable contrasts in credit metrics. On the liquidity front, the current ratio median for the 19-member group at 1.13x is weak but not disastrous. However, when adjusted for the negative free cash flow, the median becomes .11x, which is worrisome. Similarly, the total liabilities to market cap median of 1.22x seems reasonable. However, the cash flow measure of annualized funds from operation to liabilities at -.40x is one of the worst of any sector. It’s a sector of contrasts ranging from solid credits like Scott’s Miracle Grow to disasters like Agrify. The raw numbers make clear that the sector is currently credit-challenged, but a reenergized cultivator customer base should significantly revive the sector’s appeal.

The chart shows that sectors with higher median liquidity scores also tend to have higher median leverage. Perhaps the simplest view of this phenomenon is that companies with low FCF-adjusted current ratios tend to have large negative free cash flows, and that, in turn, makes them poor candidates for leverage.