Long-established in the Banks industry, KeyCorp (KEY, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 2.58%, juxtaposed with a three-month change of 7.24%. 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 KeyCorp.
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: 2/10
- Profitability rank: 5/10
- Growth rank: 5/10
- GF Value rank: 3/10
- Momentum rank: 10/10
Based on the above method, GuruFocus assigned KeyCorp the GF Score of 66 out of 100, which signals poor future outperformance potential.
Understanding KeyCorp's Business
With a market capitalization of $20.25 billion and sales amounting to $5.087 billion, KeyCorp is a significant player in the banking sector. The Ohio-based company boasts assets exceeding $180 billion, with a bank footprint spanning 16 states, primarily concentrated in Ohio and New York. KeyCorp operates through a hybrid community/corporate bank model, focusing on serving middle-market commercial clients. Despite its extensive reach and asset base, the company's operating margin is currently not applicable, indicating potential challenges in operational efficiency.
Financial Strength Breakdown
KeyCorp's financial strength indicators present some concerning insights about the company's balance sheet health. Additionally, the company's low cash-to-debt ratio at 0.07 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 9999, which is above Joel Tillinghast's warning level of 4 and is worse than 0% of 35 companies in the Banks 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.
Profitability Breakdown
KeyCorp's low Profitability rank can also raise warning signals. KeyCorp's Net Margin has declined over the past five years (-22.87%), as shown by the following data: 2020: 20.69; 2021: 37.30; 2022: 27.28; 2023: 15.56; 2024: 15.96.
Next Steps
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights KeyCorp's potential for underperformance. Investors should consider these factors when evaluating the company'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.
