Long-established in the Consumer Packaged Goods industry, Utz Brands Inc (UTZ, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 3.78%, juxtaposed with a three-month change of -15.57%. 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 Utz Brands Inc.
Deciphering 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: 3/10
- Profitability rank: 3/10
- Growth rank: 0/10
- GF Value rank: 9/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned Utz Brands Inc the GF Score of 58 out of 100, which signals poor future outperformance potential.
Understanding Utz Brands Inc's Business
Utz Brands Inc is a snack food manufacturing company with a market cap of $1.12 billion. It manufactures a diverse portfolio of salty snacks under popular brands including Utz, Zapp's, Golden Flake, Good Health, Boulder Canyon, Hawaiian, TORTIYAHS!, among others. The company's products include potato chips, pretzels, cheese snacks, pork skins, pub/party mixes, and veggie snacks. Its products are distributed nationally and internationally through grocery, mass merchant, club, convenience, drug, and other channels. It operates in the given segment: the manufacturing, distribution, marketing and sale of snack food products.
Financial Strength Breakdown
Utz Brands Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0.48 positions it worse than 96.05% of 1367 companies in the Consumer Packaged Goods 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 0.93, 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. Furthermore, the company's debt-to-Ebitda ratio is 10.51, which is above Joel Tillinghast's warning level of 4 and is worse than 90.42% of 1368 companies in the Consumer Packaged Goods 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
Utz Brands Inc's low Profitability rank can also raise warning signals. Utz Brands Inc's Operating Margin has declined over the past five years ((-83.34%)), as shown by the following data: 2018: 1.98; 2019: 3.32; 2020: 0; 2021: 0.74; 2022: 0.33. Additionally, Utz Brands Inc's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 34.55; 2019: 33.04; 2020: 0; 2021: 32.52; 2022: 31.88. This trend underscores the company's struggles to convert its revenue into profits.
Growth Prospects
A lack of significant growth is another area where Utz Brands Inc seems to falter, as evidenced by the company's low Growth rank.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While Utz Brands Inc has a rich history and a diverse product portfolio, its current financial indicators 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
