Long-established in the Semiconductors industry, Sunrun Inc (RUN, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 5.61%, juxtaposed with a three-month change of -27.77%. 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 Sunrun 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.
- Financial strength rank: 3/10
- Profitability rank: 4/10
- Growth rank: 6/10
- GF Value rank: 4/10
- Momentum rank: 4/10
Based on the above method, GuruFocus assigned Sunrun Inc the GF Score of 66 out of 100, which signals poor future outperformance potential.
Snapshot of Sunrun Inc's Business
Sunrun Inc, with a market cap of $2.92 billion, is engaged in the design, development, installation, sale, ownership, and maintenance of residential solar energy systems in the United States. The company acquires customers directly and through relationships with various solar and strategic partners. The solar systems are constructed either by Sunrun or by Sunrun's partners and are owned by the company. Sunrun's customers typically enter into 20- to 25-year agreements to utilize its solar energy system. The company also sells solar energy systems and products, such as panels and racking, and solar leads generated to customers. Despite its sales of $2.42 billion, the company has an operating margin of -31.35%, indicating challenges in profitability.
Financial Strength Analysis
Sunrun Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company has an interest coverage ratio of 0, which positions it worse than 0% of 647 companies in the Semiconductors industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Scoreis just 0.2, 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 0.07 indicates a struggle in handling existing debt levels.
Profitability Analysis
Sunrun Inc's low Profitability rank can also raise warning signals. The company's Operating Margin has declined over the past five years ((-124,879.00%)), as shown by the following data: 2018: -16.04; 2019: -25.13; 2020: -50.44; 2021: -41.38; 2022: -28.53. Additionally, Sunrun Inc's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 29.61; 2019: 24.78; 2020: 19.37; 2021: 15.19; 2022: 12.87. This trend underscores the company's struggles to convert its revenue into profits.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Sunrun Inc has a history of success in the Semiconductors industry, its current financial indicators suggest that it may struggle to maintain this performance in the future. 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
