Long-established in the Transportation industry, United Airlines Holdings Inc (UAL, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.93%, juxtaposed with a three-month change of 9.58%. 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 United Airlines Holdings 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: 1/10
- GF Value rank: 8/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned United Airlines Holdings Inc a GF Score of 67 out of 100, which signals poor future outperformance potential.
Understanding United Airlines Holdings Inc's Business
United Airlines Holdings Inc, with a market cap of $14.38 billion and sales of $52.49 billion, operates as a major U.S. network carrier. Its hubs are strategically located across San Francisco, Chicago, Houston, Denver, Los Angeles, New York/Newark, and Washington, D.C. United Airlines Holdings Inc specializes in a hub-and-spoke system that is more focused on international and long-haul travel than its large U.S. peers, positioning it uniquely within the transportation sector.
Financial Strength Breakdown
United Airlines Holdings Inc's financial strength indicators present some concerning insights about the company's balance sheet health. With an interest coverage ratio of 3.07, it is positioned worse than 70.73% of 796 companies in the Transportation industry. This ratio, which is below the preferred benchmark set by Benjamin Graham, highlights potential challenges in managing interest expenses on outstanding debt.
The company's Altman Z-Score of just 1.12 falls below the distress zone threshold, indicating a risk of financial distress in the near future. Moreover, a low cash-to-debt ratio of 0.49 and a high debt-to-equity ratio of 3.96, which is worse than 95.25% of companies in the Transportation industry, suggest an over-reliance on borrowing. The company's debt-to-Ebitda ratio of 6.33 further exacerbates the concern, surpassing Joel Tillinghast's warning level and indicating potential financial instability.
Growth Prospects
United Airlines Holdings Inc's growth trajectory appears to be stunted, as reflected by its low Growth rank. The company's revenue has declined by an average of 6.5% per year over the past three years, which is worse than 76.44% of 921 companies in the Transportation industry. This decline in revenue is a troubling sign in a market that demands constant innovation and adaptation.
Furthermore, United Airlines Holdings Inc's predictability rank is just one star out of five, which adds to the uncertainty faced by investors regarding the consistency of the company's revenue and earnings.
Next Steps
Considering United Airlines Holdings Inc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. The combination of high debt levels, poor growth prospects, and financial instability paints a challenging picture for the company's future. Investors should weigh these factors carefully when considering United Airlines Holdings Inc as part of their portfolio.
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.
