IQV - Fortrea: High Risk And Low Upside Potential

2024-02-13 14:07:22 ET

Summary

• Fortrea stock has poor fundamentals, low revenue growth, and high debt burden, making it a strong sell.
• Fortrea's balance sheet is showing warning signs, with a low Altman z score and poor ratios compared to the industry.
• The management has no clear plan to increase EBITDA margin or grow revenues- adding to the risks.

Investment thesis

Fortrea (FTRE) stock has been trading in a range bound manner since IPO (i.e. between $25-33/ Share). The company has poor fundamentals, with very low expected revenue growth (2-3%), and extremely low EBITDA margins (~5%). There is high debt burden on the company, with Debt/ EBITDA of 10.3 and Almat-Z score nearing the lower threshold- indicating imminent risks and potential inability of the company to service its debt. The management has not been able to share any detailed plans to improve EBIT margins and grow the topline- further increasing the risks....

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