Decoding Sabre Corp (SABR)'s Future: A Deep Dive into the Factors Limiting Growth
Long-established in the Travel & Leisure industry, Sabre Corp (NASDAQ:SABR) has enjoyed a stellar reputation. It has recently witnessed a surge of 3.62%, juxtaposed with a three-month change of 34.34%. However, fresh insights from the GuruFocus Score Rating 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 Sabre Corp.
Understanding 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: 3/10
Profitability rank: 5/10
Growth rank: 1/10
GF Value rank: 4/10
Momentum rank: 7/10
Based on the above method, GuruFocus assigned Sabre Corp the GF Score of 61 out of 100, which signals poor future outperformance potential.
Snapshot of Sabre Corp's Business
Sabre Corp, with a market cap of $1.57 billion, is a key player in the global distribution system for air bookings, holding the number-two share. The company's sales stand at $2.77 billion, with an operating margin of -5.54%. The travel solutions segment, which accounted for 91% of total 2022 revenue, is split between distribution (70% of segment sales) and airline IT solutions (30%) revenue. The company also has a growing hotel IT solutions division (10% of revenue). Transaction fees, which are mostly tied to volume and not price, account for the bulk of sales and profits.
Financial Strength Analysis
Sabre Corp's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 0 positions it worse than 0% of 559 companies in the Travel & Leisure industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. The company's Altman Z-Score is just -0.32, 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 0.15 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 155.38, which is above Joel Tillinghast's warning level of 4 and is worse than 99.49% of 583 companies in the Travel & Leisure industry.
Profitability Analysis
Sabre Corp's low Profitability rank can also raise warning signals. Sabre Corp's Operating Margin has declined over the past five years ((-170.80%)), as shown by the following data: 2018: 14.53; 2019: 9.14; 2020: -74.06; 2021: -39.40; 2022: -10.29. Additionally, Sabre Corp's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 28.81; 2019: 24.24; 2020: -30.11; 2021: -3.28; 2022: 15.77.
Growth Prospects
A lack of significant growth is another area where Sabre Corp seems to falter, as evidenced by the company's low Growth rank. The company's revenue has declined by -18.6 per year over the past three years, which underperforms worse than 78.62% of 767 companies in the Travel & Leisure industry. Lastly, Sabre Corp predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given Sabre Corp's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While the company has a strong reputation in the Travel & Leisure industry, its financial health and growth prospects raise concerns. Investors should consider these factors when making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
This article first appeared on GuruFocus.
