Long-established in the Personal Services industry, Regis Corp (RGS, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 15.2%, juxtaposed with a three-month change of 3.92%. Fresh insights from the GuruFocus Score Rating 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 Regis Corp.
Understanding 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.
- 1. Financial strength rank: 2/10
- 2. Profitability rank: 3/10
- 3. Growth rank: 1/10
- 4. GF Value rank: 6/10
- 5. Momentum rank: 5/10
Based on the above method, GuruFocus assigned Regis Corp the GF Score of 56 out of 100, which signals poor future outperformance potential.
Regis Corp: A Snapshot
Regis Corp, with a market cap of $48.3 million, operates beauty salons throughout North America and the United Kingdom. The company's locations provide salon products and services to the mass market, including haircutting, styling, and hair coloring. The vast majority of Regis' salons are in strip malls, shopping centers, and Wal-Mart stores in North America and serve price-conscious customers. The company derives most of its revenue from these locations. The sale of products also contributes a relatively significant percentage of total sales. Regis also operates a smaller portfolio of premium salons across North America and the U.K. The company's major brands include SmartStyle, Cost Cutters, and Supercuts.
Financial Strength Analysis
Regis Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0.23 positions it worse than 100% of 77 companies in the Personal Services industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Scoreis just 0.05, 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 0.02 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 46.37, which is above Joel Tillinghast's warning level of 4 and is worse than 97.3% of 74 companies in the Personal Services industry.
Profitability Analysis
Regis Corp's low Profitability rank can also raise warning signals. Regis Corp's Operating Margin has declined over the past five years ((-60,892.00%)), as shown by the following data: 2019: -0.03; 2020: -11.99; 2021: -19.84; 2022: -5.52; 2023: -6.51. Additionally, Regis Corp's Gross Margin has also declined over the past five years, as evidenced by the data: 2019: 45.59; 2020: 35.17; 2021: 18.77; 2022: 23.78; 2023: 28.02. This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where Regis Corp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -37.2 per year over the past three years, which underperforms worse than 96.88% of 96 companies in the Personal Services industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Regis Corp predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given Regis Corp's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. The company's declining operating margin, gross margin, and revenue growth rate, coupled with its low financial strength and predictability rank, signal a challenging road ahead. Investors should tread carefully and consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
