Long-established in the Software industry, MicroStrategy Inc (MSTR, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a decline of 2.57%, juxtaposed with a three-month change of 22.82%. 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 MicroStrategy Inc.
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: 3/10
- 2. Profitability rank: 5/10
- 3. Growth rank: 5/10
- 4. GF Value rank: 1/10
- 5. Momentum rank: 9/10
Based on the above method, GuruFocus assigned MicroStrategy Inc the GF Score of 62 out of 100, which signals poor future outperformance potential.
Understanding MicroStrategy Inc's Business
MicroStrategy Inc is a provider of enterprise analytics and mobility software. It offers MicroStrategy Analytics platform that delivers reports and dashboards and enables users to conduct ad hoc analysis and share insights through mobile devices or the Web; MicroStrategy Server, which provides analytical processing and job management. The company's reportable operating segment is engaged in the design, development, marketing, and sales of its software platform through licensing arrangements and cloud-based subscriptions and related services. With a market cap of $4.89 billion and sales of $500.23 million, the company's operating margin stands at 1.35%.
Financial Strength Breakdown
MicroStrategy Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0.12 positions it worse than 99.61% of 1539 companies in the Software industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Scoreis just 0.73, 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 0.03 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 2.74, which is worse than 95.34% of 2082 companies in the Software industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
Profitability Breakdown
MicroStrategy Inc's low Profitability rank can also raise warning signals. Additionally, MicroStrategy Inc's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 80.01; 2019: 79.44; 2020: 81.06; 2021: 82.01; 2022: 79.37. This trend underscores the company's struggles to convert its revenue into profits.
Next Steps
Given the company'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.
