Long-established in the Utilities - Regulated industry, Dominion Energy Inc (NYSE:D) has enjoyed a stellar reputation. However, it has recently witnessed a daily loss of 3.29%, juxtaposed with a three-month change of -15.8%. 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 Dominion Energy Inc.

• Warning! GuruFocus has detected 8 Warning Signs with D. Click here to check it out.

• D 30-Year Financial Data

• The intrinsic value of D

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: 3/10

• Profitability rank: 7/10

• Growth rank: 4/10

• GF Value rank: 8/10

• Momentum rank: 2/10

Based on the above method, GuruFocus assigned Dominion Energy Inc the GF Score of 67 out of 100, which signals poor future outperformance potential.

Company Snapshot: Dominion Energy Inc

Based in Richmond, Virginia, Dominion Energy Inc is an integrated energy company with over 30 gigawatts of electric generation capacity and more than 90,000 miles of electric transmission and distribution lines. The company, which has a market cap of $36.15 billion and sales of $18.35 billion, is constructing a rate-regulated 5.2 GW wind farm off the Virginia Beach coast. With an operating margin of 25.67%, Dominion Energy Inc's business operations and history present a mixed picture of stability and potential challenges.

Financial Strength Analysis

Dominion Energy Inc's financial strength indicators present some concerning insights about the company's balance sheet health. The company's interest coverage ratio of 2.67 positions it worse than 66.98% 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 0.59, 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 indicates a struggle in handling existing debt levels. Furthermore, the company's debt-to-Ebitda ratio is 5.85, which is above Joel Tillinghast's warning level of 4 and is worse than 70.39% of 439 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 Dominion Energy Inc seems to falter, as evidenced by the company's low Growth rank. Lastly, Dominion Energy 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 GF Score highlights the firm's unparalleled position for potential underperformance. While Dominion Energy Inc has a rich history and significant presence in the Utilities - Regulated industry, its current 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 first appeared on GuruFocus.