Long-established in the Credit Services industry, Upstart Holdings Inc (UPST, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 6.56%, juxtaposed with a three-month change of -17.4%. However, fresh insights from the GF Score 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 Upstart Holdings Inc.
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: 4/10
- Profitability rank: 3/10
- Growth rank: 5/10
- GF Value rank: 10/10
- Momentum rank: 0/10
Based on the above method, GuruFocus assigned Upstart Holdings Inc the GF Score of 52 out of 100, which signals poor future outperformance potential.
Upstart Holdings Inc: A Snapshot
Upstart Holdings Inc, with a market cap of $2.47 billion, provides credit services through its proprietary, cloud-based, artificial intelligence lending platform. The platform aggregates consumer demand for loans and connects it to the network of Upstart AI-enabled bank partners. The company's revenue is primarily comprised of fees paid by banks. Despite its innovative approach, the company's operating margin stands at 0, indicating potential challenges in profitability.
Financial Strength Analysis
Upstart Holdings Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's low cash-to-debt ratio at 0.44 indicates a struggle in handling existing debt levels. Additionally, the company's debt-to-Ebitda ratio is 9999, which is above Joel Tillinghast's warning level of 4 and is worse than 0% of 239 companies in the Credit Services 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
Upstart Holdings Inc's low Profitability rank can also raise warning signals. The company's Net Margin has declined over the past five years (-821.00%), as shown by the following data: 2018: -12.89; 2019: -0.29; 2020: 2.69; 2021: 16.00; 2022: -12.97; .
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While Upstart Holdings Inc has made strides in the Credit Services industry, its current financial health and profitability metrics suggest that it may struggle to maintain its historical performance. As value investors, it's crucial to 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
