Long-established in the Banks industry, KeyCorp (KEY, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 1.2%, juxtaposed with a three-month change of 17.35%. However, 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 KeyCorp.
What Is 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: 7/10
- Momentum rank: 8/10
Based on the above method, GuruFocus assigned KeyCorp a GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding KeyCorp's Business
With a market cap of $14.17 billion and sales of $6.22 billion, KeyCorp operates with a significant presence in the banking sector. The Ohio-based company, with assets of over $170 billion, has a bank footprint spanning 16 states, with a strong concentration in Ohio and New York. KeyCorp is primarily focused on serving middle-market commercial clients through a hybrid community/corporate bank model. Despite its substantial market presence, the company's operating margin is currently not applicable, indicating an area that requires further scrutiny.
Financial Strength Breakdown
KeyCorp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's low cash-to-debt ratio at 0.04 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is not applicable, which is above Joel Tillinghast's warning level of 4 and is worse than 0% of 32 companies in the Banks industry. Tillinghast suggests that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Profitability Breakdown
KeyCorp's Profitability rank of 5/10 can also raise warning signals. The company's Net Margin has declined over the past five years, with figures showing a decrease from 27.78% in 2019 to 15.56% in 2023. This downward trend in profitability is a red flag for investors looking for stable or growing margins.
Growth Prospects
A lack of significant growth is another area where KeyCorp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has not shown growth over the past three years, which underperforms worse than 0% of 1,404 companies in the Banks industry. Stagnating revenues may pose concerns in a fast-evolving market. Additionally, KeyCorp's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Considering KeyCorp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should be cautious and consider these factors when evaluating the company's future prospects. For those seeking more robust investment opportunities, GuruFocus Premium members can find companies with strong GF Scores using the following screener link: GF Score Screen.
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
