Long-established in the Manufacturing - Apparel & Accessories industry, VF Corp (VFC, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 1.72%, juxtaposed with a three-month change of -4.37%. 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 VF Corp.
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: 5/10
- Profitability rank: 5/10
- Growth rank: 0/10
- GF Value rank: 2/10
- Momentum rank: 4/10
Based on the above method, GuruFocus assigned VF Corp the GF Score of 55 out of 100, which signals poor future outperformance potential.
Snapshot of VF Corp's Business
VF Corp, with a market cap of $6.68 billion, designs, produces, and distributes branded apparel, footwear, and accessories. Its portfolio includes renowned brands like Vans, The North Face, Timberland, Supreme, and Dickies. VF Corp markets its products in the Americas, Europe, and Asia-Pacific through wholesale sales to retailers, e-commerce, and branded stores owned by the company and partners. The company, which traces its roots to 1899, has grown through multiple acquisitions.
Financial Strength Analysis
VF Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's Altman Z-Score is just 1.34, 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.
The company's debt-to-equity ratio is 2.9, which is worse than 94.96% of 913 companies in the Manufacturing - Apparel & Accessories 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 15.63, which is above Joel Tillinghast's warning level of 4 and is worse than 92.25% of 774 companies in the Manufacturing - Apparel & Accessories 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
VF Corp's low Profitability rank can also raise warning signals. With a Piotroski F-Score of 2, VF Corp's financial health appears concerning. This score, rooted in Joseph Piotroski's nine-point scale, evaluates a firm's profitability, liquidity, and operating efficiency. Given its rating, VF Corp might be facing challenges in these areas.
Growth Prospects
A lack of significant growth is another area where VF Corp seems to falter, as evidenced by the company's low Growth rank. Lastly, VF Corp predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given VF Corp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. It's crucial for investors to consider these factors when making investment decisions. Will VF Corp be able to overcome these challenges and return to its former glory? Only time will tell.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
