Long-established in the Retail - Cyclical industry, Wayfair Inc (W, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 7.86%, juxtaposed with a three-month change of -15.58%. 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 Wayfair 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.
- Financial strength rank: 4/10
- Profitability rank: 3/10
- Growth rank: 5/10
- GF Value rank: 8/10
- Momentum rank: 6/10
Based on the above method, GuruFocus assigned Wayfair Inc the GF Score of 69 out of 100, which signals poor future outperformance potential.
Wayfair Inc: A Snapshot
Wayfair Inc, with a market cap of $6.68 billion, engages in e-commerce in the United States (86% of 2022 sales), Canada, the United Kingdom, Germany, and Ireland. At the end of 2022, the firm offered more than 40 million products from more than 20,000 suppliers under the brands Wayfair, Joss & Main, AllModern, Birch Lane, and Perigold. Its offerings include furniture, everyday and seasonal decor, decorative accents, housewares, and other home goods. Wayfair was founded in 2002 and began trading publicly in 2014.
Financial Strength Analysis
Wayfair Inc's financial strength indicators present some concerning insights about the company's balance sheet health. Wayfair Inc has an interest coverage ratio of 0, which positions it worse than 0% of 772 companies in the Retail - Cyclical 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 1.64, 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 0.31 indicates a struggle in handling existing debt levels.
Profitability Analysis
Wayfair Inc's low Profitability rank can also raise warning signals. Wayfair Inc's Operating Margin has declined over the past five years ((-37,732.00%)), as shown by the following data: 2018: -6.98; 2019: -10.19; 2020: 2.55; 2021: -0.60; 2022: -10.76; .
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While Wayfair Inc has a commendable history in the Retail - Cyclical industry, its current financial indicators suggest that it may struggle to maintain its performance in the future. 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
