Long-established in the Chemicals industry, International Flavors & Fragrances Inc (IFF, Financial) has enjoyed a stellar reputation. It has recently witnessed a surge of 1.81%, juxtaposed with a three-month change of -10.8%. 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 International Flavors & Fragrances 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.
- Financial strength rank: 4/10
- Profitability rank: 7/10
- Growth rank: 2/10
- GF Value rank: 8/10
- Momentum rank: 4/10
Based on the above method, GuruFocus assigned International Flavors & Fragrances Inc the GF Score of 69 out of 100, which signals poor future outperformance potential.
Company Snapshot: International Flavors & Fragrances Inc
International Flavors & Fragrances Inc, with a market cap of $17.96 billion, is the largest specialty ingredients producer globally. The company, which reported sales of $11.86 billion, sells ingredients for the food, beverage, health, household goods, personal care, and pharmaceutical industries. With an operating margin of 5.94%, the company makes proprietary formulations, partnering with customers to deliver custom solutions. The nourish segment, generating roughly half of the revenue, is a leading flavor producer and also sells texturants, plant-based proteins, and other ingredients. The health and biosciences business, generating around one fourth of revenue, is a global leader in probiotics and enzymes. IFF is also one of the leading fragrance producers in the world. The firm also sells pharmaceutical ingredients such as excipients and time-release polymers.
Financial Strength Analysis
International Flavors & Fragrances Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 1.7 positions it worse than 89.71% of 1157 companies in the Chemicals 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 0.94, 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 0.06 indicates a struggle in handling existing debt levels.
Growth Prospects
A lack of significant growth is another area where International Flavors & Fragrances Inc seems to falter, as evidenced by the company's low Growth rank. Lastly, International Flavors & Fragrances Inc 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 GuruFocus Score Rating highlights the firm's unparalleled position for potential underperformance. While International Flavors & Fragrances Inc has a rich history and a strong presence in the Chemicals industry, its current financial indicators and growth prospects 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
