Long-established in the Oil & Gas industry, Borr Drilling Ltd (BORR, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 4.4%, juxtaposed with a three-month change of -4.62%. However, 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 Borr Drilling Ltd.
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.
- 1. Financial strength rank: 3/10
- 2. Profitability rank: 4/10
- 3. Growth rank: 5/10
- 4. GF Value rank: 1/10
- 5. Momentum rank: 6/10
Based on the above method, GuruFocus assigned Borr Drilling Ltd the GF Score of 59 out of 100, which signals poor future outperformance potential.
Introducing Borr Drilling Ltd
Borr Drilling Ltd is a drilling contractor that owns and operates jack-up rigs of modern and high-specification designs providing drilling services to the oil and gas exploration and production industry. The company operates a fleet of 16 jack-up drilling rigs. Geographically the activities are carried out through Norway. With a market cap of $1.792 billion and sales of $616 million, the company has an operating margin of 23.39%.
Financial Strength Analysis
Borr Drilling Ltd's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 1 positions it worse than 92.49% of 759 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 0.13, 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 0.05 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 8.05, which is above Joel Tillinghast's warning level of 4 and is worse than 89.71% of 700 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.
Profitability Analysis
Borr Drilling Ltd's low Profitability rank can also raise warning signals. This metric, combined with the company's financial strength and growth metrics, highlights the firm's potential for underperformance.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
