Long-established in the Banks industry, KeyCorp (KEY, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 3.67%, juxtaposed with a three-month change of 13.51%. However, 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 KeyCorp.
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: 2/10
- Profitability rank: 5/10
- Growth rank: 4/10
- GF Value rank: 8/10
- Momentum rank: 4/10
Based on the above method, GuruFocus assigned KeyCorp the GF Score of 66 out of 100, which signals poor future outperformance potential.
KeyCorp Business Overview
With a market cap of $9.9 billion and sales of $6.9 billion, KeyCorp operates in the banking industry, primarily serving middle-market commercial clients through a hybrid community/corporate bank model. The Ohio-based company has assets of over $170 billion, with its bank footprint spanning 16 states, predominantly concentrated in its two largest markets: Ohio and New York.
Financial Strength Analysis
KeyCorp's financial strength indicators present some concerning insights about the company's balance sheet health. 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 2.1, which is worse than 85.07% of 1326 companies in the Banks 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 9999, which is above Joel Tillinghast's warning level of 4 and is worse than 0% of 30 companies in the Banks 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
KeyCorp's low Profitability rank can also raise warning signals. KeyCorp's Net Margin has declined over the past five years (-9.97%), as shown by the following data: 2018: 30.31; 2019: 27.78; 2020: 20.69; 2021: 37.30; 2022: 27.28; .
Growth Prospects
A lack of significant growth is another area where KeyCorp seems to falter, as evidenced by the company's low Growth rank.
Conclusion
Given KeyCorp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a strong reputation in the banking industry, its current financial indicators suggest that it may struggle to maintain its historical performance. Therefore, investors should exercise caution and conduct further research before making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article, generated by GuruFocus, is designed to provide general insights and is not tailored financial advice. Our commentary is rooted in historical data and analyst projections, utilizing an impartial methodology, and is not intended to serve as specific investment guidance. It does not formulate a recommendation to purchase or divest any stock and does not consider individual investment objectives or financial circumstances. Our objective is to deliver long-term, fundamental data-driven analysis. Be aware that our analysis might not incorporate the most recent, price-sensitive company announcements or qualitative information. GuruFocus holds no position in the stocks mentioned herein.
