Long-established in the Utilities - Regulated industry, CenterPoint Energy Inc (CNP, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 1.51%, juxtaposed with a three-month change of -5.95%. 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 CenterPoint Energy 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.
- Financial strength rank: 3/10
- Profitability rank: 6/10
- Growth rank: 3/10
- GF Value rank: 5/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned CenterPoint Energy Inc the GF Score of 67 out of 100, which signals poor future outperformance potential.
CenterPoint Energy Inc: A Brief Overview
CenterPoint Energy Inc, with a market cap of $16.88 billion, operates in the Utilities - Regulated industry. The company owns a portfolio of businesses, providing transmission and distribution services to more than 2.5 million customers in the Houston area, southern Indiana, and west central Ohio. It also has natural gas distribution systems in six states serving approximately 4 million customers. The company's sales stand at $9.27 billion with an operating margin of 17.9%.
Financial Strength Analysis
CenterPoint Energy Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 2.89 positions it worse than 62.96% of 432 companies in the Utilities - Regulated industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Score is just 0.78, 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 0.04 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 5.76, which is above Joel Tillinghast's warning level of 4 and is worse than 69.98% of 443 companies in the Utilities - Regulated industry.
Growth Prospects
A lack of significant growth is another area where CenterPoint Energy Inc seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -0.5 per year over the past three years, which underperforms worse than 83.95% of 486 companies in the Utilities - Regulated industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, CenterPoint Energy Inc 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 GF Score highlights the firm's unparalleled position for potential underperformance. While CenterPoint Energy Inc has a rich history in the Utilities - Regulated industry, its current financial and growth 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
