Long-established in the Media - Diversified industry, Paramount Global (PARA, Financial) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 0.96%, juxtaposed with a three-month change of -0.7%. 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 Paramount Global.
What Is 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: 2/10
- GF Value rank: 4/10
- Momentum rank: 5/10
Based on the above method, GuruFocus assigned Paramount Global a GF Score of 69 out of 100, which signals poor future outperformance potential.
Understanding Paramount Global's Business
Paramount Global operates in three global business segments: TV media, filmed entertainment, and direct to consumer. The TV media business includes television production studios and various broadcast and cable networks, including CBS, 15 owned CBS affiliates, Paramount, Nickelodeon, MTV, BET, and VH1. Filmed entertainment consists of multiple film studios, most importantly Paramount Pictures. The film studios produce and distribute movies that they license to movie theaters and other media outlets. Direct to consumer includes multiple streaming platforms, including Paramount+, which now includes Showtime, Pluto TV, and BET+. Much of the content on Paramount's streaming platforms is created by the production studios housed within the firm's other two business segments.
Financial Strength Breakdown
Paramount Global's financial strength indicators present some concerning insights about the company's balance sheet health. Paramount Global has an interest coverage ratio of 1.59, which positions it worse than 86.28% of 627 companies in the Media - Diversified 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 0.77, 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.
Growth Prospects
A lack of significant growth is another area where Paramount Global seems to falter, as evidenced by the company's low Growth rank. Over the past five years, Paramount Global has witnessed a decline in its earnings before interest, taxes, depreciation, and amortization (EBITDA). The three-year growth rate is recorded at -74.1, while the five-year growth rate is at -47.7. These figures underscore potential challenges in the company's profitability. Lastly, Paramount Global's predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Conclusion
Considering Paramount Global's financial strength, profitability, and growth metrics, the GF Score highlights the firm's unparalleled position for potential underperformance. Investors seeking more robust investment opportunities may consider exploring other companies with stronger GF Scores. 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.
