Long-established in the Real Estate industry, DigitalBridge Group Inc (DBRG, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 2.05%, juxtaposed with a three-month change of 27.08%. 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 DigitalBridge Group Inc.
Decoding 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: 4/10
- GF Value rank: 9/10
- Momentum rank: 10/10
Based on the above method, GuruFocus assigned DigitalBridge Group Inc the GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding DigitalBridge Group Inc's Business
DigitalBridge Group Inc is a global digital infrastructure firm. Previously known as Colony Capital, the firm merged with its subsidiary Digital Colony in 2020 to rebrand as DigitalBridge. This merger discontinued ownership of hospitality real estate and shifted focus toward digital infrastructure. Its services occupy segments which are Investment Management, Operating, and Corporate and Other. The Operating segment, which owns and leases digital assets, accounts for the majority of the firm's revenue from markets primarily located in the United States.
Financial Strength Breakdown
DigitalBridge Group 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 1333 companies in the Real Estate 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-Scoreis just -0.62, 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.
The company's debt-to-equity ratio is 4.05, which is worse than 94.59% of 1554 companies in the Real Estate industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations. Additionally, the company's debt-to-Ebitda ratio is 15.12, which is above Joel Tillinghast's warning level of 4 and is worse than 80.86% of 1254 companies in the Real Estate 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
DigitalBridge Group Inc's low Profitability rank can also raise warning signals. DigitalBridge Group Inc's Operating Margin has declined over the past five years ((-362.82%)), as shown by the following data: 2018: 14.18; 2019: -198.63; 2020: -51.58; 2021: -34.14; 2022: -37.25; . Additionally, DigitalBridge Group Inc's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 66.07; 2019: 78.07; 2020: 67.97; 2021: 64.34; 2022: 63.01; . This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where DigitalBridge Group Inc seems to falter, as evidenced by the company's low Growth rank. Lastly, DigitalBridge Group Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While DigitalBridge Group Inc has a rich history in the Real Estate industry, its current financial indicators suggest a challenging road ahead. Investors should consider these factors carefully when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
