Long-established in the Business Services industry, The GEO Group Inc (GEO, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 3.61%, juxtaposed with a three-month change of 18.92%. 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 The GEO Group 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: 8/10
- Growth rank: 3/10
- GF Value rank: 3/10
- Momentum rank: 4/10
Based on the above method, GuruFocus assigned The GEO Group Inc the GF Score of 68 out of 100, which signals poor future outperformance potential.
Snapshot of The GEO Group Inc's Business
The GEO Group Inc, with a market cap of $1.07 billion, specializes in detention facilities and community-reentry centers. It operates in four segments: U.S. Secure Services, Electronic Monitoring and Supervision Services, Reentry Services, and International Services. The company has reported sales of $2.44 billion and an operating margin of 16.05%.
Financial Strength Analysis
The GEO Group Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company has an interest coverage ratio of 1.87, which positions it worse than 89.56% of 795 companies in the Business Services industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Score is just 1.32, 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 0.02 indicates a struggle in handling existing debt levels.
Growth Prospects
A lack of significant growth is another area where The GEO Group Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -2.2 per year over the past three years, which underperforms worse than 68.48% of 974 companies in the Business Services industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, The GEO Group Inc 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 GF Score highlights the firm's unparalleled position for potential underperformance. While The GEO Group Inc has a history of strong performance, its current financial indicators suggest that it may struggle to maintain this trend. 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.
