Long-established in the Consumer Packaged Goods industry, The Kraft Heinz Co (KHC, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.29%, juxtaposed with a three-month change of -3.63%. 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 The Kraft Heinz Co.
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: 5/10
- Profitability rank: 7/10
- Growth rank: 3/10
- GF Value rank: 6/10
- Momentum rank: 2/10
Based on the above method, GuruFocus assigned The Kraft Heinz Co the GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding The Kraft Heinz Co Business
In July 2015, Kraft merged with Heinz to create the third-largest food and beverage manufacturer in North America behind PepsiCo and Nestle and the fifth-largest player in the world. Beyond its namesake brands, the combined firm's portfolio includes Oscar Mayer, Velveeta, and Philadelphia. While the retail channel drives around 85% of its total sales, the firm operates a growing presence in the foodservice arena. Outside North America, Kraft Heinz's global reach counts a distribution network in Europe and emerging markets that drives 20%-25% of its consolidated sales base, as its products are sold in more than 190 countries and territories.
Financial Strength Breakdown
The Kraft Heinz Co's financial strength indicators present some concerning insights about the company's balance sheet health. The company's Altman Z-Score is just 1.1, 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 0.05 indicates a struggle in handling existing debt levels.
A lack of significant growth is another area where The Kraft Heinz Co seems to falter, as evidenced by the company's low Growth rank. Lastly, The Kraft Heinz Co predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While The Kraft Heinz Co has a rich history and a broad market presence, its current financial and growth 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