Long-established in the Oil & Gas industry, Genesis Energy LP (GEL, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 3.24%, juxtaposed with a three-month change of 9.99%. 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 Genesis Energy LP.
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: 6/10
- Growth rank: 3/10
- GF Value rank: 7/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned Genesis Energy LP the GF Score of 68 out of 100, which signals poor future outperformance potential.
Genesis Energy LP Business Overview
Genesis Energy LP is a US-based limited partnership that focuses on the midstream segment of the crude oil and natural gas industry. It provides services to crude oil and natural gas producers, and industrial and commercial enterprises. The company's reportable segments are offshore pipeline transportation, sodium minerals and sulfur services, onshore facilities and transportation, and marine transportation. It generates maximum revenue from the offshore pipeline transportation segment. The Sodium minerals and sulfur services segment includes trona and trona-based exploring, mining, processing, producing, marketing, and selling activities, as well as processing high sulfur gas streams for refineries to remove the sulfur, and selling the related by-product.
Financial Strength Analysis
Genesis Energy LP's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 1.4 positions it worse than 89.45% of 768 companies in the Oil & Gas 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 0.81, 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 indicates a struggle in handling existing debt levels.
The company's debt-to-equity ratio is 2.52, which is worse than 91.82% of 831 companies in the Oil & Gas 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 5.52, which is above Joel Tillinghast's warning level of 4 and is worse than 83.59% of 713 companies in the Oil & Gas 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.
Growth Prospects
A lack of significant growth is another area where Genesis Energy LP seems to falter, as evidenced by the company's low Growth rank. Lastly, Genesis Energy LP predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
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 Genesis Energy LP has a rich history in the Oil & Gas industry, its current financial indicators and growth prospects suggest that it may struggle to maintain its past performance. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
