Long-established in the Consumer Packaged Goods industry, Kellanova Co (K, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.03%, juxtaposed with a three-month change of 9.66%. 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 Kellanova Co.
What Is 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: 8/10
- Growth rank: 4/10
- GF Value rank: 6/10
- Momentum rank: 1/10
Based on the above method, GuruFocus assigned Kellanova Co the GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding Kellanova Co's Business
Kellanova Co, with a market cap of $19.69 billion and sales of $15.87 billion, operates as a leading global manufacturer and marketer of salty snacks, snack bars, frozen breakfast fare, meat alternatives, and other packaged foods. Following its split from the North American cereal business, Kellanova Co has expanded its reach, manufacturing in around 20 countries and marketing in more than 180. Its product mix includes well-known brands such as Pringles, Cheez-It, Rice Krispies Treats, Pop-Tarts, Eggo, Nutri-Grain, and Morningstar Farms, with international sales comprising about half of its consolidated sales base.
Financial Strength Breakdown
Kellanova Co's financial strength indicators present some concerning insights about the company's balance sheet health. The company's Altman Z-Score is just 2.53, 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. Furthermore, the company's low cash-to-debt ratio at 0.14 indicates a struggle in handling existing debt levels. Additionally, the company's debt-to-Ebitda ratio is 4.12, which is above Joel Tillinghast's warning level of 4 and is worse than 68.62% of companies in the Consumer Packaged Goods industry.
Growth Prospects
A lack of significant growth is another area where Kellanova Co seems to falter, as evidenced by the company's low Growth rank. Over the past five years, Kellanova Co has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -3.1, while the five-year growth rate is at -0.8. These figures underscore potential challenges in the company's profitability. Lastly, Kellanova Co's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Considering Kellanova Co's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. The company's challenges in managing debt, coupled with its lackluster growth and low predictability rank, paint a picture of a company that may struggle to replicate its past success. Investors should weigh these factors carefully when considering Kellanova Co's future prospects. For those seeking more robust investment opportunities, GuruFocus Premium members can explore companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
