Long-established in the Media - Diversified industry, Manchester United PLC (MANU, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 0.92%, juxtaposed with a three-month change of 3.75%. 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 Manchester United PLC.
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: 4/10
- 2. Profitability rank: 5/10
- 3. Growth rank: 2/10
- 4. GF Value rank: 1/10
- 5. Momentum rank: 6/10
Based on the above method, GuruFocus assigned Manchester United PLC the GF Score of 57 out of 100, which signals poor future outperformance potential.
Company Snapshot: Manchester United PLC
Manchester United PLC operates a professional football club together with related and ancillary activities. The company manages the soccer team and all affiliated club activities of the Manchester United Football Club, which includes the media network, foundation, fan zone, news, and sports features, and team merchandise. Manchester United is based in England. The company has three principal sectors from which the majority of the revenue is generated including Commercial, Broadcasting, and Matchday. With a market cap of $3.13 billion and sales of $718.79 million, the company's operating margin stands at -12.9%.
Financial Strength Analysis
Manchester United PLC's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0 positions it worse than 0% of 610 companies in the Media - Diversified 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 0.95, 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 0.1 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 6.97, which is worse than 97.33% of 786 companies in the Media - Diversified industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations. Additionally, the company's debt-to-Ebitda ratio is 7.75, which is above Joel Tillinghast's warning level of 4 and is worse than 87.66% of 616 companies in the Media - Diversified 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
Manchester United PLC's low Profitability rank can also raise warning signals. Manchester United PLC's Operating Margin has declined over the past five years ((-288.92%)), as shown by the following data: 2019: 7.15; 2020: -2.00; 2021: -8.79; 2022: -14.50; 2023: -9.16; .
Growth Prospects
A lack of significant growth is another area where Manchester United PLC seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -3 per year over the past three years, which underperforms worse than 57.47% of 957 companies in the Media - Diversified industry. Stagnating revenues may pose concerns in a fast-evolving market. Over the past five years, Manchester United PLC has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -40.1, while the five-year growth rate is at -23.9. These figures underscore potential challenges in the company's profitability. Lastly, Manchester United PLC predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given Manchester United PLC's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While the company has a rich history and a strong brand, its financial indicators suggest that it may struggle to maintain its past performance. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
