Long-established in the Media - Diversified industry, Paramount Global (PARA, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 6.28%, juxtaposed with a three-month change of -6.57%. 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 Paramount Global.
Decoding 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: 4/10
- 2. Profitability rank: 7/10
- 3. Growth rank: 4/10
- 4. GF Value rank: 4/10
- 5. Momentum rank: 4/10
Based on the above method, GuruFocus assigned Paramount Global the GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding Paramount Global's Business
Paramount Global is the rebranded recombination of CBS and Viacom that has created a media conglomerate with global scale. CBS contributed Showtime in addition to its television assets--the CBS television network, 28 local TV stations, and 50% of CW, a joint venture between CBS and WarnerMedia. Viacom brought several leading cable network properties, including Nickelodeon, MTV, BET, Comedy Central, VH1, CMT, and Paramount. Paramount Pictures produces original motion pictures and owns a library of 2,500 films, including the Mission: Impossible and Transformers series. Paramount operates a number of streaming services, most notably Paramount+ and Pluto TV.
Financial Strength Breakdown
Paramount Global's financial strength indicators present some concerning insights about the company's balance sheet health. Paramount Global has an interest coverage ratio of 0, which positions it worse than 0% of 614 companies in the Media - Diversified 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 1.05, 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 0.1 indicates a struggle in handling existing debt levels.
Growth Prospects
A lack of significant growth is another area where Paramount Global seems to falter, as evidenced by the company's low Growth rank. Over the past five years, Paramount Global has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -18.9, while the five-year growth rate is at -9.5. These figures underscore potential challenges in the company's profitability. Lastly, Paramount Global predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Paramount Global has a rich history and a diverse 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
