Long-established in the Banks industry, Comerica Inc (CMA, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 2.81%, juxtaposed with a three-month change of 23.08%. However, 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 Comerica 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.
- 1. Financial strength rank: 3/10
- 2. Profitability rank: 5/10
- 3. Growth rank: 3/10
- 4. GF Value rank: 4/10
- 5. Momentum rank: 2/10
Based on the above method, GuruFocus assigned Comerica Inc the GF Score of 57 out of 100, which signals poor future outperformance potential.
Comerica Inc: A Snapshot
Comerica is a financial services company headquartered in Dallas. It is primarily focused on relationship-based commercial banking. In addition to Texas, Comerica's other primary geographies are California and Michigan, with locations also in Arizona and Florida and select businesses operating in several other states as well as Canada. With a market cap of $6.22 billion and sales of $3.92 billion, the company's operating margin is currently not applicable.
Financial Strength Analysis
Comerica Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's low cash-to-debt ratio at 0.62 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 2.95, which is worse than 91.82% of 1332 companies in the Banks 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 4.22, which is above Joel Tillinghast's warning level of 4 and is worse than 75.53% of 1312 companies in the Banks 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 Analysis
Comerica Inc's low Profitability rank can also raise warning signals. Comerica Inc's Net Margin has declined over the past five years (-12.23%), as shown by the following data: 2018: 37.11; 2019: 35.96; 2020: 17.07; 2021: 39.37; 2022: 32.57.
Growth Prospects
A lack of significant growth is another area where Comerica Inc seems to falter, as evidenced by the company's low Growth rank. Lastly, Comerica Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given Comerica Inc's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. It's crucial for investors to 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.
