Suburban Propane Partners LP (SPH): A Deep Dive into Its Performance Potential
Long-established in the Utilities - Regulated industry, Suburban Propane Partners LP (NYSE:SPH) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 2.13%, juxtaposed with a three-month change of 11.35%. 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 Suburban Propane Partners LP.
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: 4/10
Profitability rank: 7/10
Growth rank: 4/10
GF Value rank: 5/10
Momentum rank: 2/10
Based on the above method, GuruFocus assigned Suburban Propane Partners LP the GF Score of 67 out of 100, which signals poor future outperformance potential.
Suburban Propane Partners LP: A Snapshot
Suburban Propane Partners LP, with a market cap of $1.02 billion, is a key player in the Utilities - Regulated industry. The company, which primarily operates in the East Coast and West Coast regions of the United States, distributes propane, fuel oil, and other refined fuels. It also engages in natural gas and electricity marketing in the deregulated New York and Pennsylvania markets. With sales of $1.44 billion and an operating margin of 11.47%, the company has a significant presence in its industry.
Financial Strength Analysis
Suburban Propane Partners LP's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 2.37 positions it worse than 73.02% of 430 companies in the Utilities - Regulated industry. This ratio highlights potential challenges the company might face when handling its interest expenses on outstanding debt. It's worth noting that 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 1.19, 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 0.01 indicates a struggle in handling existing debt levels.
The company's debt-to-equity ratio is 2.31, which is worse than 89.6% of 452 companies in the Utilities - Regulated 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 6.11, which is above Joel Tillinghast's warning level of 4 and is worse than 73.02% of 441 companies in the Utilities - Regulated industry. Tillinghast said in his book Big Money Think's Small: Biases, Blind Spots, and Smarter Investing that a high debt-to-Ebitda ratio can be a red flag unless tangible assets cover the debt.
Growth Prospects
A lack of significant growth is another area where Suburban Propane Partners LP seems to falter, as evidenced by the company's low Growth rank. Lastly, Suburban Propane Partners LP predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. While Suburban Propane Partners LP has a strong presence in its industry, its financial health and growth prospects raise concerns about its ability to outperform in the future. 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, 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.
This article first appeared on GuruFocus.
