Long-established in the Telecommunication Services industry, Lumen Technologies Inc (NYSE:LUMN) has enjoyed a stellar reputation. It has recently witnessed a daily gain of 5.92%, juxtaposed with a three-month change of -28.22%. 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 Lumen Technologies Inc.
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.
Based on the above method, GuruFocus assigned Lumen Technologies Inc the GF Score of 52 out of 100, which signals poor future outperformance potential.
Lumen Technologies Inc is one of the United States’ largest telecommunications carriers serving global enterprises. The company has 450,000 route miles of fiber, including over 35,000 route miles of subsea fiber connecting Europe, Asia, and Latin America. Its merger with Level 3 in 2017 and divestiture of much of its incumbent local exchange carrier, or ILEC, business in 2022 has shifted the company’s operations away from its legacy consumer business and toward enterprises (now nearly 80% of revenue). Lumen offers businesses a full menu of communications services, providing colocation and data center services, data transportation, and end-user phone and internet service. On the consumer side, Lumen provides broadband and phone service across 37 states, where it has 4.5 million broadband customers.
Lumen Technologies Inc’s financial strength indicators present some concerning insights about the company’s balance sheet health. The company’s interest coverage ratio of 1.77 positions it worse than 78.22% of 303 companies in the Telecommunication Services 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 -0.95, 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 0.02 indicates a struggle in handling existing debt levels. The company’s debt-to-equity ratio is 8.92, which is worse than 97.41% of 347 companies in the Telecommunication Services industry. A high debt-to-equity ratio suggests over-reliance on borrowing and vulnerability to market fluctuations.
A lack of significant growth is another area where Lumen Technologies Inc seems to falter, as evidenced by the company’s low Growth rank. The company’s revenue has declined by -4.7 per year over the past three years, which underperforms worse than 78.1% of 379 companies in the Telecommunication Services industry. Stagnating revenues may pose concerns in a fast-evolving market. Lastly, Lumen Technologies Inc predictability rank is just one star out of five, adding to investor uncertainty regarding revenue and earnings consistency.
Given the company’s financial strength, profitability, and growth metrics, the GuruFocus Score Rating highlights the firm’s unparalleled position for potential underperformance. While Lumen Technologies Inc has a rich history and a broad market presence, its financial indicators suggest that it may struggle to maintain its past performance. Investors should consider these factors when making investment decisions.