Long-established in the Utilities - Regulated industry, New Fortress Energy Inc (NFE, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 6.4%, juxtaposed with a three-month change of 13.46%. 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 New Fortress Energy Inc.
What Is 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: 4/10
- Growth rank: 6/10
- GF Value rank: 4/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned New Fortress Energy Inc the GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding New Fortress Energy Inc Business
New Fortress Energy Inc, with a market cap of $5.85 billion, is an integrated gas-to-power company. Its business model spans the entire production and delivery chain from natural gas procurement and liquefaction to logistics, shipping, terminals, and conversion or development of a natural gas-fired generation. It has invested in floating, liquefied natural gas vessels to both lower the cost of acquiring gas while securing a long-term supply for its terminals. Its segments include terminals and infrastructure, or T&I, and ships. The company reported sales of $2.42 billion and an operating margin of 37.83%.
Financial Strength Breakdown
New Fortress Energy Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 3.41 positions it worse than 55.58% of 430 companies in the Utilities - Regulated 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-Score is just 0.92, 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 0.02 indicates a struggle in handling existing debt levels.
The company's debt-to-equity ratio is 4.21, which is worse than 95.8% of 452 companies in the Utilities - Regulated 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 6.81, which is above Joel Tillinghast's warning level of 4 and is worse than 79.04% of 439 companies in the Utilities - Regulated 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 Breakdown
New Fortress Energy Inc's low Profitability rank can also raise warning signals.
Next Steps
Given the company'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.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
