Long-established in the Software industry, Dayforce Inc (DAY, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 2.99%, juxtaposed with a three-month change of -22.6%. 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 Dayforce 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: 5/10
- Profitability rank: 5/10
- Growth rank: 3/10
- GF Value rank: 4/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned Dayforce Inc a GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding Dayforce Inc's Business
Dayforce Inc, with a market cap of $8.28 billion and sales of $1.57 billion, operates primarily in the payroll and human capital management solutions sector. Since its 2012 acquisition of Dayforce, the company has shifted from its legacy on-premises Bureau business to become a leading cloud HCM provider. As of fiscal 2022, about 80% of group revenue was derived from the flagship Dayforce platform, targeting enterprise clients. The remaining revenue is about evenly split between the cloud platform Powerpay, targeting small businesses in Canada, and legacy Bureau products.
Financial Strength Breakdown
Dayforce Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 3.37 positions it worse than 84.06% of 1600 companies in the Software industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. Additionally, the company's Altman Z-Score of 0.78 is below the distress zone of 1.81, suggesting potential financial distress over the next few years. Moreover, the cash-to-debt ratio at 0.32 indicates a struggle in handling existing debt levels, and the debt-to-Ebitda ratio of 4.34 is above Joel Tillinghast's warning level of 4.
Profitability and Growth Concerns
Dayforce Inc's low Profitability rank can also raise warning signals. The company's Gross Margin has declined over the past five years, with figures showing a decrease from 44.68 in 2019 to 42.71 in 2023. This trend underscores the company's struggles to convert its revenue into profits. Additionally, a lack of significant growth is another area where Dayforce Inc seems to falter, as evidenced by the company's low Growth rank.
Conclusion
Considering Dayforce Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should be cautious and consider these factors when evaluating the company's future prospects. 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.
