Long-established in the Metals & Mining industry, Equinox Gold Corp (EQX, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 2.82%, juxtaposed with a three-month change of -3.8%. 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 Equinox Gold 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.
- Financial strength rank: 5/10
- Profitability rank: 3/10
- Growth rank: 0/10
- GF Value rank: 10/10
- Momentum rank: 10/10
Based on the above method, GuruFocus assigned Equinox Gold Corp the GF Score of 63 out of 100, which signals poor future outperformance potential.
Equinox Gold Corp: A Snapshot
Equinox Gold Corp is a mining company engaged in the operation, acquisition, exploration, and development of mineral properties, with a focus on gold. With a market cap of $1.34 billion and sales of $1.01 billion, Equinox Gold operates around seven gold mines and has a clear plan to increase production by advancing a pipeline of growth projects. However, its operating margin of 1.63% suggests potential challenges in profitability.
Financial Strength Analysis
Equinox Gold Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0.33 positions it worse than 98.97% of 1358 companies in the Metals & Mining 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 1.01, 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 0.35 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 6.72, which is above Joel Tillinghast's warning level of 4 and is worse than 82.95% of 528 companies in the Metals & Mining industry.
Profitability Analysis
Equinox Gold Corp's low Profitability rank can also raise warning signals. Additionally, Equinox Gold Corp's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 22.98; 2019: 29.77; 2020: 26.64; 2021: 19.89; 2022: 7.93. This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where Equinox Gold Corp seems to falter, as evidenced by the company's low Growth rank. Lastly, Equinox Gold Corp predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given Equinox Gold Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a solid history in the Metals & Mining industry, its current financial indicators and declining gross margin suggest that it may struggle to maintain its past performance. Investors should 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
