Long-established in the Oil & Gas industry, Kinder Morgan Inc (KMI, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.2%, juxtaposed with a three-month change of 34.7%. 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 Kinder Morgan 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: 8/10
- Growth rank: 5/10
- GF Value rank: 1/10
- Momentum rank: 6/10
Based on the above method, GuruFocus assigned Kinder Morgan Inc the GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding Kinder Morgan Inc Business
Kinder Morgan Inc is one of the largest midstream energy firms in North America, with a market cap of $62,328.11 million and sales amounting to $15,151 million. The company boasts an operating margin of 28.39%. Kinder Morgan Inc operates approximately 82,000 miles of pipelines and 139 storage terminals. It is actively involved in the transportation, storage, and processing of natural gas, crude oil, refined products, natural gas liquids, and carbon dioxide. The majority of its cash flows are derived from fee-based contracts for handling, moving, and storing fossil fuel products.
Financial Strength Breakdown
Kinder Morgan Inc's financial strength indicators present some concerning insights about the company's balance sheet health. Kinder Morgan Inc has an interest coverage ratio of 2.32, which positions it worse than 80.49% of 728 companies in the Oil & Gas industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that the esteemed investor Benjamin Graham typically favored companies with an interest coverage ratio of at least five.
The company's Altman Z-Score is just 1.16, 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 indicates a struggle in handling existing debt levels.
Additionally, the company's debt-to-Ebitda ratio is 4.82, which is above Joel Tillinghast's warning level of 4 and is worse than 82.11% of 710 companies in the Oil & Gas industry. Tillinghast said in his book “Big Money Think's Small: Biases, Blind Spots, and Smarter Investing” that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Next Steps
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should carefully consider these factors when evaluating Kinder Morgan Inc's future prospects. For those seeking companies with stronger GF Scores, GuruFocus Premium members can explore more options 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.
