Long-established in the Software industry, Global Blue Group Holding AG (GB, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 5.73%, juxtaposed with a three-month change of 13.82%. However, fresh insights from the GuruFocus Score Rating hint at potential headwinds. Notably, its diminished rankings in financial strength, growth, and valuation suggest that the company might not live up to its historical performance. Join us as we dive deep into these pivotal metrics to unravel the evolving narrative of Global Blue Group Holding AG.
Understanding the GF Score
The GF Score is a stock performance ranking system developed by GuruFocus using five aspects of valuation, which has been found to be closely correlated to the long-term performances of stocks by backtesting from 2006 to 2021. The stocks with a higher GF Score generally generate higher returns than those with a lower GF Score. Therefore, when picking stocks, investors should invest in companies with high GF Scores. The GF Score ranges from 0 to 100, with 100 as the highest rank.
- Financial strength rank: 3/10
- Profitability rank: 4/10
- Growth rank: 1/10
- GF Value rank: 4/10
- Momentum rank: 4/10
Based on the above method, GuruFocus assigned Global Blue Group Holding AG the GF Score of 55 out of 100, which signals poor future outperformance potential.
Global Blue Group Holding AG: A Snapshot
Global Blue Group Holding AG, with a market cap of $1.12 billion, offers a seamless shopping and payment journey for tourists and also provides a wide range of Added-Value Payment Solutions for all the stakeholders involved, including retailers and international shoppers. The company operates into three business segments: TFSS, AVPS, and RTS. With sales of $368.2 million and an operating margin of 12.72%, the company has established a significant presence in the software industry.
Financial Strength Analysis
Global Blue Group Holding AG's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 1.11 positions it worse than 94.84% of 1551 companies in the Software industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just -0.03, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.23 indicates a struggle in handling existing debt levels.
The company's debt-to-equity ratio is 69.73, which is worse than 99.9% of 2100 companies in the Software industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations. Additionally, the company's debt-to-Ebitda ratio is 8.74, which is above Joel Tillinghast's warning level of 4 and is worse than 92.45% of 1390 companies in the Software industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Profitability Analysis
Global Blue Group Holding AG's low Profitability rank can also raise warning signals. Global Blue Group Holding AG's Operating Margin has declined over the past five years ((-69.18%)), as shown by the following data: 2019: 14.17; 2020: 9.80; 2021: -362.59; 2022: -76.95; 2023: 4.38; .
Additionally, Global Blue Group Holding AG's Gross Margin has also declined over the past five years, as evidenced by the data: 2019: 0; 2020: 76.86; 2021: 60.88; 2022: 68.03; 2023: 67.90; . This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where Global Blue Group Holding AG seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -8.7 per year over the past three years, which underperforms worse than 82.14% of 2413 companies in the Software industry. Stagnating revenues may pose concerns in a fast-evolving market.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Global Blue Group Holding AG has a commendable history, its current financial indicators suggest that it may struggle to maintain its performance in the future. Investors should consider these factors carefully before making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
