Long-established in the Utilities - Regulated industry, Exelon Corp (EXC, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 1.08%, juxtaposed with a three-month change of 6.77%. 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 Exelon 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: 7/10
- Growth rank: 3/10
- GF Value rank: 7/10
- Momentum rank: 4/10
Based on the above method, GuruFocus assigned Exelon Corp a GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding Exelon Corp's Business
With a market cap of $37.07 billion and sales of $21.73 billion, Exelon Corp serves approximately 10 million power and gas customers at its six regulated utilities in Illinois, Pennsylvania, Maryland, New Jersey, Delaware, and Washington, D.C. The company boasts an operating margin of 18.48%, reflecting its efficiency in managing expenses relative to its revenue. Despite its significant presence in the energy sector, the GF Score indicates that Exelon Corp may face challenges ahead.
Financial Strength Breakdown
Exelon Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 2.32 positions it worse than 73.18% of 440 companies in the Utilities - Regulated industry. This ratio, which measures how easily a company can pay interest on outstanding debt, is below the preferred benchmark set by Benjamin Graham, indicating potential challenges in financial flexibility.
The company's Altman Z-Score of 0.7 falls below the distress zone threshold, suggesting a risk of financial distress in the near future. Moreover, the low cash-to-debt ratio of 0.01 indicates a struggle in handling existing debt levels. The debt-to-Ebitda ratio of 5.54, above Joel Tillinghast's warning level, further underscores the company's high leverage relative to earnings before interest, taxes, depreciation, and amortization.
Growth Prospects
A lack of significant growth is another area where Exelon Corp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by an average of 13.6% per year over the past three years, which is worse than 95.34% of companies in the Utilities - Regulated industry. This decline in revenue, coupled with a decrease in EBITDA over the past five years, raises concerns about the company's ability to maintain profitability and compete effectively in a rapidly evolving market.
Exelon Corp's predictability rank of one star out of five adds to investor uncertainty regarding the consistency of revenue and earnings, which is crucial for forecasting future performance.
Next Steps
Considering Exelon Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should be cautious and consider these factors 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.
