Montrose Environmental Group Inc (MEG): A Deep Dive into Its Performance Potential

Unraveling the Factors That Could Limit Future Outperformance

Long-established in the Waste Management industry, Montrose Environmental Group Inc (MEG, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 9.69%, juxtaposed with a three-month change of -19.24%. 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 Montrose Environmental Group Inc.


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.

Based on the above method, GuruFocus assigned Montrose Environmental Group Inc the GF Score of 58 out of 100, which signals poor future outperformance potential.

Montrose Environmental Group Inc: A Snapshot

Montrose Environmental Group Inc is an environmental services company with a market cap of $1.06 billion and sales of $560.36 million. The firm operates through segments such as Assessment, Permitting and Response, Measurement and Analysis, and Remediation and Reuse. These segments provide a range of services from scientific advisory and consulting to testing and analysis of air, water, and soil. However, the company's operating margin stands at -5.43%, indicating potential challenges in profitability.


Financial Strength Analysis

Montrose Environmental Group Inc'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 158 companies in the Waste Management industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt.

The company's Altman Z-Score is just 1.94, which is below the safe threshold of 2.99. Although this does not imply immediate danger of financial distress, the stock may face some financial struggles if the Altman Z-score drops below 1.81.

Additionally, the company's low cash-to-debt ratio at 0.1 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 9.42, which is above Joel Tillinghast's warning level of 4 and is worse than 86.59% of 164 companies in the Waste Management industry.

Profitability Analysis

Montrose Environmental Group Inc's low Profitability rank can also raise warning signals. The company's Operating Margin has declined over the past five years ((-197.00%)), as shown by the following data: 2018: -5.72; 2019: -3.23; 2020: -3.07; 2021: 2.73; 2022: -5.74.

Growth Prospects

A lack of significant growth is another area where Montrose Environmental Group Inc seems to falter, as evidenced by the company's low Growth rank.



Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Montrose Environmental Group Inc has a commendable history in the Waste Management industry, its current financial indicators suggest that it may struggle to maintain its performance in the future.

GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen


I/We may personally own shares in some of the companies mentioned above. However, those positions are not material to either the company or to my/our portfolios.