Long-established in the Interactive Media industry, Groupon Inc (GRPN, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 11.17%, juxtaposed with a three-month change of 190.4%. However, 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 Groupon Inc.
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: 3/10
- 2. Profitability rank: 4/10
- 3. Growth rank: 1/10
- 4. GF Value rank: 1/10
- 5. Momentum rank: 7/10
Based on the above method, GuruFocus assigned Groupon Inc the GF Score of 52 out of 100, which signals poor future outperformance potential.
Snapshot of Groupon Inc's Business
Groupon Inc, with a market cap of $409.04 million, acts as the middleman between consumers and merchants, offering a variety of products and services at discounts via its online store. It offers consumers daily deals from local merchants. It generates revenue from the take rate on the vouchers' purchase and/or usage. More than 60% of Groupon's revenue comes from North America. However, the company's operating margin stands at -15.45%, indicating potential profitability issues.
Financial Strength Breakdown
Groupon Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0 positions it worse than 0% of 331 companies in the Interactive Media industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Score is just -3.01, 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 0.4 indicates a struggle in handling existing debt levels.
Profitability Breakdown
Groupon Inc's low Profitability rank can also raise warning signals. Groupon Inc's Operating Margin has declined over the past five years ((-980.06%)), as shown by the following data: 2018: 2.04; 2019: 1.80; 2020: -5.68; 2021: 3.85; 2022: -17.99. With a Piotroski F-Score of 2, Groupon Inc'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, Groupon Inc might be facing challenges in these areas.
Growth Prospects
A lack of significant growth is another area where Groupon Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -36.7 per year over the past three years, which underperforms worse than 95.14% of 514 companies in the Interactive Media industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Groupon Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given Groupon Inc's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While the company has made significant strides in the Interactive Media industry, its current financial health and growth prospects raise concerns about its ability to maintain its performance. 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
