Long-established in the Transportation industry, American Airlines Group Inc (AAL, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 2.79%, juxtaposed with a three-month change of 24%. 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 American Airlines Group Inc.
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: 4/10
- Profitability rank: 6/10
- Growth rank: 2/10
- GF Value rank: 8/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned American Airlines Group Inc a GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding American Airlines Group Inc's Business
With a market cap of $9.15 billion and sales of $52.91 billion, American Airlines Group Inc stands as the world's largest airline by aircraft, capacity, and scheduled revenue passenger miles. Its major U.S. hubs include Charlotte, Chicago, Dallas/Fort Worth, Los Angeles, Miami, New York, Philadelphia, Phoenix, and Washington, D.C. The company is a dominant player in connecting Latin America with destinations in the United States, generating over 30% of U.S. airline revenue. After completing a major fleet renewal, American Airlines Group Inc boasts the youngest fleet among U.S. legacy carriers, with an operating margin of 8.95%.
Financial Strength Breakdown
American Airlines Group Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 2.19 positions it worse than 79.7% of 798 companies in the Transportation industry, signaling potential challenges in managing interest expenses on outstanding debt. The Altman Z-Score of just 0.79, below the distress zone of 1.81, suggests possible financial distress in the near future. Furthermore, the low cash-to-debt ratio at 0.26 indicates difficulties in managing existing debt levels. The debt-to-Ebitda ratio of 9.68, above Joel Tillinghast's warning level of 4, is worse than 89.93% of 834 companies in the Transportation industry, highlighting a potential red flag unless tangible assets cover the debt.
Growth Prospects
The company's low Growth rank reflects a lack of significant growth. American Airlines Group Inc's revenue has declined by an average of -10.1% per year over the past three years, underperforming 83.48% of 920 companies in the Transportation industry. This stagnation in revenues may raise concerns in a rapidly evolving market. Additionally, the company's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Considering American Airlines Group Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. The company's challenges in financial health, coupled with its lackluster growth prospects, paint a cautious picture for investors. As the airline industry continues to navigate through post-pandemic recovery and faces new regulatory and technological changes, American Airlines Group Inc may need to address these financial and growth concerns to improve its GF Score and secure a more promising future.
GuruFocus Premium members can find more 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.
