Long-established in the Utilities - Regulated industry, FirstEnergy Corp (FE, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.45%, juxtaposed with a three-month change of 14.15%. 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 is an investor-owned holding company with a market cap of $21.78 billion and sales of $12.9 billion. It operates with a 17.27% operating margin and owns one of the nation's largest electric transmission systems, serving 10 regulated distribution utilities across six mid-Atlantic and Midwestern states. 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. With an interest coverage ratio of 2.26, FirstEnergy Corp is positioned worse than 72.94% of its industry peers. This ratio, which measures the company's ability to handle its interest expenses, is below the preferred benchmark set by Benjamin Graham, indicating potential challenges ahead.
The company's Altman Z-Score of 0.74 falls below the distress zone threshold, suggesting a risk of financial distress in the coming years. Moreover, the low cash-to-debt ratio of 0.01 and a high debt-to-equity ratio of 2.34, which is worse than 90.68% of the industry, underscore the company's struggle with debt management. The debt-to-Ebitda ratio of 6.09 further raises red flags about the company's financial leverage.
Growth Prospects
FirstEnergy Corp's growth trajectory appears to be stunted, as reflected by its low Growth rank. The company's one-star predictability rank out of five adds to the investor uncertainty, signaling inconsistency in revenue and earnings, which is a deterrent for those seeking stable growth.
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.
Is FirstEnergy Corp poised for a turnaround, or will the current challenges continue to hinder its performance? Value investors must consider whether the company's strategic initiatives can overcome the financial and growth hurdles outlined in this analysis.
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.
