Shareholders of CSI Compressco LP (CCLP, Financial) and Fossil Group Inc. (FOSL, Financial) have seen their assets decline in value dramatically over the past several years, underperforming the S&P 500 Index substantially. It also appears their profitability is not improving and financial conditions could be stronger. In short, prospects for these stocks look grim. In addition, sell-side analysts on Wall Street have not surpassed the hold rating with their recommendations for these stocks, while most of the market has an overweight median rating. This indicates the share prices of these stocks are expected to continue to underperform the market in the coming months.
Shares were down 37% over the past six months, up 14% over the past year and down 55% over the past three years, underperforming the S&P 500 by 47%, 13% and 143%.
The company pays a small dividend of 1 cent per share each quarter, but financial conditions don't look solid as the Altman Z score is 0.45, indicating financial distress and the possibility of facing bankruptcy. Also, the return on invested capital is 0.76%, which compared to a higher weighted average cost of capital of 8.78% means that operations do not create value, but instead destroy it. GuruFocus gives the financial strength a score of 2 out of a total of 10.
GuruFocus rated the company's profitability 4 out of 10. For this rating, these are the financial indicators that weighed the most negatively: a net margin ratio of -23.01% (versus the industry median of plus 1.79%) and a return on total assets ratio of -9.04% (versus the industry median of plus 0.36%). The three-year Ebitda growth rate is -9.3% (versus the industry median of -0.5%).
To prevent another flare-up in the pandemic, governments are once again taking measures to fight Covid-19, causing supply chain problems in oil and gas equipment and services. CSI Compressco strives for a better financial situation through organic growth and the backdrop does not make it any easier for the company. The share price is expected to continue to suffer from these headwinds in the coming months.
Shares traded around $1.19 at close on Friday for a market capitalization of $167.06 million and a 52-week range of 99 cents to $2.35.
On Wall Street, the stock has one recommendation rating of Hold.
Shares have declined by 24% over the past six months, increased by 20% over the past year and declined by 38% over the past three years, underperforming the S&P 500 by 34%, 7% and 126%.
Fossil Group does not pay a dividend. The balance sheet could be better as the Altman Z score of 2.42 indicates the company is in some sort of financial distress that will not improve as long as its operations keep on destroying value instead of creating it, as indicated by the ROIC of 0.80% versus the WACC of 10.88%. GuruFocus rated the financial strength with a score of 5 out of 10.
Regarding profitability, the company has seen its revenue per share decline over the past three years at a pace of 18.1% per annum. Furthermore, the net margin of 0.1% is far below the industry median of 2.68%. GuruFocus assigns a score of 5 out of 10 for the company’s profitability.
Rapidly rising inflation, a record in several countries, is impacting consumer spending on luxury goods and other products that are not essential. These kinds of headwinds will continue to affect Fossil Group and other luxury goods companies as long as commodity prices, which are largely responsible for the unparalleled inflation, remain elevated due to geopolitical and supply chain issues.
The stock closed at $10.29 on Friday for a market capitalization of $536.58 million and a 52-week range of $8.43 to $28.5999.
On Wall Street, the stock has one recommendation rating of underweight.