Long-established in the Telecommunication Services industry, Crexendo Inc (CXDO, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 10.26%, juxtaposed with a three-month change of 7.47%. 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 Crexendo Inc.
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.
- 1. Financial strength rank: 5/10
- 2. Profitability rank: 4/10
- 3. Growth rank: 5/10
- 4. GF Value rank: 2/10
- 5. Momentum rank: 1/10
Based on the above method, GuruFocus assigned Crexendo Inc the GF Score of 56 out of 100, which signals poor future outperformance potential.
Crexendo Inc: A Snapshot
Crexendo Inc is a provider of cloud communications, UCaaS, call center, collaboration services, and other cloud business services. The company operates through two segments: Cloud telecommunications and Software Solutions. Its cloud telecommunications segment offers hardware, software, and unified communication solutions for businesses using IP or cloud technology over any high-speed Internet connection. The Software Solutions segment is involved in revenue generation from software licenses, software maintenance support and professional services. It generates subscription and maintenance support revenue from customer support and other supportive services. The company offers warranties on its products. It derives a majority of revenue from the Cloud telecommunications segment.
Financial Strength Analysis
Crexendo Inc's financial strength indicators present some concerning insights about the company's balance sheet health. Crexendo Inc has an interest coverage ratio of 0, which positions it worse than 0% of 298 companies in the Telecommunication Services 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-Scoreis just -1.47, which is below the distress zone of 1.81. This suggests that the company may face financial distress over the next few years.
Profitability Analysis
Crexendo Inc's low Profitability rank can also raise warning signals. Crexendo Inc's Operating Margin has declined over the past five years ((-108,227.00%)), as shown by the following data: 2018: -1.73; 2019: 7.86; 2020: 6.05; 2021: -10.00; 2022: -12.55; .
Additionally, Crexendo Inc's Gross Margin has also declined over the past five years, as evidenced by the data: 2018: 67.93; 2019: 69.86; 2020: 69.81; 2021: 62.05; 2022: 63.56; . This trend underscores the company's struggles to convert its revenue into profits.
Conclusion
Given the company's financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While Crexendo Inc has a commendable history in the Telecommunication Services industry, its current financial indicators suggest that it may struggle to maintain its performance in the future. Therefore, investors should exercise caution and conduct thorough research before making investment decisions.
GuruFocus Premium members can find more companies with strong GF Scores using the following screener link: GF Score Screen
