Long-established in the Utilities - Regulated industry, FirstEnergy Corp (FE, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.72%, juxtaposed with a three-month change of 13.61%. 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 FirstEnergy Corp.
What Is 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 FirstEnergy Corp a GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding FirstEnergy Corp's Business
FirstEnergy Corp, with a market cap of $21.82 billion and sales of $12.9 billion, operates as an investor-owned holding company with 10 regulated distribution utilities across six mid-Atlantic and Midwestern states. It also owns and operates one of the nation's largest electric transmission systems, boasting an operating margin of 17.27%. This snapshot of the company's business operations and history sets the stage for a deeper analysis of its financial health and growth prospects.
Financial Strength Breakdown
FirstEnergy Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 2.26 positions it worse than 72.87% of 435 companies in the Utilities - Regulated industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The Altman Z-Score of just 0.74, which is below the distress zone of 1.81, suggests that the company may face financial distress over the next few years. Moreover, the low cash-to-debt ratio at 0.01 indicates a struggle in handling existing debt levels. The debt-to-equity ratio of 2.34 is worse than 90.64% of 470 companies in the industry, and the debt-to-Ebitda ratio of 6.09 exceeds Joel Tillinghast's warning level of 4, indicating a red flag unless tangible assets cover the debt.
Growth Prospects
The company's low Growth rank and one-star predictability rank out of five add to investor uncertainty regarding revenue and earnings consistency. These metrics suggest that FirstEnergy Corp may struggle to achieve significant growth in the near future, which is a critical factor for long-term investment success.
Next Steps
Considering FirstEnergy Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should weigh these factors carefully when evaluating the company's future prospects. For those seeking more robust investment opportunities, GuruFocus Premium members can explore companies with strong GF Scores using the GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
