Long-established in the Software industry, GoDaddy Inc (GDDY, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.69%, juxtaposed with a three-month change of 16.43%. 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 GoDaddy 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: 4/10
- Profitability rank: 6/10
- Growth rank: 7/10
- GF Value rank: 1/10
- Momentum rank: 6/10
Based on the above method, GuruFocus assigned GoDaddy Inc a GF Score of 68 out of 100, which signals poor future outperformance potential.
Understanding GoDaddy Inc's Business
GoDaddy Inc is a provider of domain registration and aftermarket services, website hosting, security, design, and business productivity tools, commerce solutions, and domain registry services. The company primarily targets micro- to small businesses, website design professionals, registrar peers, and domain investors. Since acquiring payment processing platform Poynt in 2021, the company has expanded into omnicommerce solutions, including offering an online payment gateway and offline point-of-sale devices. With a market cap of $22.48 billion and sales of $4.4 billion, GoDaddy operates with an operating margin of 17.97%.
Financial Strength Breakdown
GoDaddy Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The interest coverage ratio of 4.7 positions it worse than 78.75% of 1628 companies in the Software industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. 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 2.03, which is below the safe threshold of 2.99. Although this does not imply immediate danger of financial distress, the stock may face some financial struggles if the Altman Z-score drops below 1.81. Additionally, the company's low cash-to-debt ratio at 0.11 indicates a struggle in handling existing debt levels. The company's debt-to-equity ratio is 24.99, which is worse than 99.59% of 2218 companies in the Software 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 4.31, which is above Joel Tillinghast's warning level of 4 and is worse than 82.08% of 1646 companies in the Software industry.
Conclusion
Considering GoDaddy Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors should be cautious and consider these factors when evaluating the company's future prospects.
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.
