Long-established in the Banks industry, KeyCorp (KEY, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.91%, juxtaposed with a three-month change of 16.34%. 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.
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: 2/10
- Profitability rank: 5/10
- Growth rank: 4/10
- GF Value rank: 9/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned KeyCorp a GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding KeyCorp's Business
With a market cap of $12.49 billion and sales of $6.55 billion, Ohio-based KeyCorp's bank footprint spans 16 states, but it is predominantly concentrated in its two largest markets: Ohio and New York. KeyCorp is primarily focused on serving middle-market commercial clients through a hybrid community/corporate bank model. Despite its significant presence, the company's operating margin is currently not applicable, indicating potential areas of concern in operational efficiency.
Financial Strength Breakdown
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. Furthermore, the company's debt-to-Ebitda ratio is not applicable, which is above Joel Tillinghast's warning level of 4 and is worse than 0% of 32 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 Breakdown
KeyCorp's low Profitability rank can also raise warning signals. The company's Net Margin has declined over the past five years (-1.48%), with figures showing a fluctuation from 27.78% in 2019 to 29.86% in 2023. This inconsistency in maintaining high-profit margins reflects challenges in converting sales into actual profit, which is crucial for long-term sustainability.
Growth Prospects
A lack of significant growth is another area where KeyCorp seems to falter, as evidenced by the company's low Growth rank. Without a strong trajectory in revenue or earnings growth, KeyCorp may struggle to keep pace with competitors or to deliver value to shareholders. This stagnation could be a result of market saturation, competitive pressures, or a lack of innovation in product and service offerings.
Next Steps
Considering KeyCorp's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should weigh these factors carefully against the backdrop of the company's historical reputation and current market position. For those seeking more robust investment opportunities, GuruFocus Premium members can explore 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.
