Long-established in the Oil & Gas industry, Expand Energy Corp (EXE, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 1.37%, juxtaposed with a three-month change of 12.57%. 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 Expand Energy Corp.
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: 3/10
- Growth rank: 0/10
- GF Value rank: 1/10
- Momentum rank: 9/10
Based on the above method, GuruFocus assigned Expand Energy Corp the GF Score of 51 out of 100, which signals poor future outperformance potential.
Understanding Expand Energy Corp Business
Expand Energy Corp is an independent natural gas producer in the United States, with a market cap of $27.6 billion and sales amounting to $5.3 billion. The company is committed to fueling a more affordable, reliable, and lower-carbon future by focusing on developing abundant natural gas, oil, and gas liquids to expand energy access. Despite its ambitious goals, the company faces challenges, as indicated by its operating margin of -18.49%. This negative margin suggests that the company is currently operating at a loss, which could impact its ability to invest in future growth and innovation.
Financial Strength Breakdown
Expand Energy Corp's financial strength indicators present some concerning insights about the company's balance sheet health. Expand Energy Corp has an interest coverage ratio of 0, which positions it worse than 0% of 719 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 1.72, 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 0.07 indicates a struggle in handling existing debt levels.
Additionally, the company's debt-to-Ebitda ratio is 5.23, which is above Joel Tillinghast's warning level of 4 and is worse than 80.56% of 715 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.
Profitability Breakdown
Expand Energy Corp's low Profitability rank can also raise warning signals. Expand Energy Corp's Operating Margin has declined over the past five years ((-113,879.00%)), as shown by the following data: 2020: -5.13; 2021: 0; 2022: 32.57; 2023: 30.46; 2024: -16.51.
With a Piotroski F-Score of 2, Expand Energy Corp's financial health appears concerning. This score, rooted in Joseph Piotroski's nine-point scale, evaluates a firm's profitability, liquidity, and operating efficiency. Given its rating, Expand Energy Corp might be facing challenges in these areas.
Growth Prospects
A lack of significant growth is another area where Expand Energy Corp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by 0 per year over the past three years, which underperforms worse than 0% of 826 companies in the Oil & Gas industry. Stagnating revenues may pose concerns in a fast-evolving market.
Lastly, Expand Energy Corp predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
In conclusion, Expand Energy Corp's financial strength, profitability, and growth metrics, as highlighted by the GF Score, underscore the firm's potential for underperformance. The company's low financial strength and profitability ranks, coupled with its stagnant growth, suggest that it may face significant challenges in the future. Investors should carefully consider these factors when evaluating the company's potential for long-term success. For those interested in exploring companies with stronger GF Scores, GuruFocus Premium members can utilize 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.
