Long-established in the Consumer Packaged Goods industry, The Kraft Heinz Co (KHC, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 2.37%, juxtaposed with a three-month change of -2.06%. 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 The Kraft Heinz Co.
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: 5/10
- Profitability rank: 7/10
- Growth rank: 3/10
- GF Value rank: 6/10
- Momentum rank: 1/10
Based on the above method, GuruFocus assigned The Kraft Heinz Co a GF Score of 64 out of 100, which signals poor future outperformance potential.
Understanding The Kraft Heinz Co Business
The Kraft Heinz Co, with a market cap of $42.57 billion and annual sales of $26.32 billion, operates with a robust operating margin of 19.96%. Formed in July 2015 from the merger of Kraft and Heinz, the company stands as the third-largest food and beverage manufacturer in North America and the fifth-largest globally. Its portfolio includes well-known brands like Oscar Mayer, Velveeta, and Philadelphia. Predominantly driven by the retail channel, which accounts for about 85% of total sales, The Kraft Heinz Co also boasts a growing presence in the foodservice sector. Internationally, it has a significant distribution network across Europe and emerging markets, contributing approximately 25% to its consolidated sales, with products available in over 190 countries.
Financial Strength Breakdown
The financial strength of The Kraft Heinz Co presents some concerning insights. The company's Altman Z-Score is just 1.11, indicating potential financial distress in the near future. Additionally, a low cash-to-debt ratio of 0.05 suggests difficulties in managing existing debt levels. The debt-to-Ebitda ratio stands at 4.25, surpassing the cautionary benchmark set by Joel Tillinghast, which signals a red flag unless covered by tangible assets.
Growth Prospects
The growth trajectory for The Kraft Heinz Co appears limited, as reflected by its low Growth rank. Moreover, a predictability rank of just one star out of five adds to the uncertainty concerning the consistency of its revenue and earnings.
Conclusion
Considering The Kraft Heinz Co's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. For investors seeking more robust investment opportunities, exploring companies with higher GF Scores is advisable. GuruFocus Premium members can utilize the following screener link to find such companies: 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.
