Long-established in the Consumer Packaged Goods industry, The Kraft Heinz Co (KHC, Financial) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 0.36%, juxtaposed with a three-month change of 4.31%. 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 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: 2/10
- GF Value rank: 6/10
- Momentum rank: 1/10
Based on the above method, GuruFocus assigned The Kraft Heinz Co a GF Score of 62 out of 100, which signals poor future outperformance potential.
Understanding The Kraft Heinz Co Business
With a market cap of $42.95 billion and sales of $27.16 billion, The Kraft Heinz Co operates as a major player in the food and beverage industry. The company boasts an operating margin of 19.3%, reflecting its efficiency in managing expenses relative to revenue. Formed from the merger of Kraft and Heinz in July 2015, The Kraft Heinz Co stands as the third-largest food and beverage manufacturer in North America, trailing only PepsiCo and Nestle, and ranks fifth globally. Its brand portfolio extends beyond its namesake to include Oscar Mayer, Velveeta, and Philadelphia. While retail sales constitute approximately 85% of total sales, The Kraft Heinz Co is also expanding its presence in the foodservice sector. Internationally, the company's distribution network spans Europe and emerging markets, accounting for 20%-25% of its consolidated sales, with products available in over 190 countries and territories.
Financial Strength Breakdown
The Kraft Heinz Co's financial strength indicators present some concerning insights about the company's balance sheet health. The company's Altman Z-Score is just 1.13, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years. Additionally, the company's low cash-to-debt ratio at 0.05 indicates a struggle in handling existing debt levels.
Growth Prospects
A lack of significant growth is another area where The Kraft Heinz Co seems to falter, as evidenced by the company's low Growth rank. The company's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Next Steps
Considering The Kraft Heinz Co'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. 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.
