Frontline Plc (FRO): A Deep Dive into Its Performance Potential
Long-established in the Oil & Gas industry, Frontline Plc (NYSE:FRO) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 5.85%, juxtaposed with a three-month change of 26.43%. 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 Frontline Plc.
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: 5/10
Profitability rank: 7/10
Growth rank: 4/10
GF Value rank: 3/10
Momentum rank: 3/10
Based on the above method, GuruFocus assigned Frontline Plc the GF Score of 67 out of 100, which signals poor future outperformance potential.
Snapshot of Frontline Plc's Business
Frontline Plc is an international shipping company engaged in the seaborne transportation of crude oil and oil products. The group operates through the tankers segment, which includes crude oil tankers and product tankers. Its geographical area of operation includes the Arabian Gulf, West African, the North Sea, and the Caribbean. Frontline earns revenue through voyage charters, time charters, and a finance lease. It is also involved in the charter, purchase, and sale of vessels. With a market cap of $4.09 billion and sales of $1.92 billion, the company has an operating margin of 42.82%.
Financial Strength Analysis
Frontline Plc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's Altman Z-Score is just 2.34, 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 0.23 indicates a struggle in handling existing debt levels.
Growth Prospects
A lack of significant growth is another area where Frontline Plc seems to falter, as evidenced by the company's low Growth rank. Lastly, Frontline Plc's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given Frontline Plc's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While the company has a strong history in the Oil & Gas industry, its current financial and growth indicators suggest that it may struggle to maintain its historical performance. 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.
