Garrett Motion

Garrett Motion Inc earns a 2-star quantitative star rating, illustrating our stance that this share class is a somewhat unattractive choice, and investors should look elsewhere for more fruitful opportunities. The stock currently trades at a 19% premium over our quantitative fair value estimate of $22.41 per share; however, this estimate should be taken with a pinch of salt due to its high uncertainty rating.

The firm's valuation metrics decrease our estimated fair value. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. Reflecting the firm's valuation is its book value yield of -13.3%, which ranks in the bottom 10% compared with global peers. The market value of this company's shares looks expensive relative to the book (accounting) value of equity, which contributes to our view that shares are expensive.

The company's balance sheet is an additional cause for concern. Excessive leverage heightens financial risk, potentially undermining a firm's value. The firm's current ratio of 1.0, for example, sits in the bottom 20% globally. This suggests the company may struggle to cope with economic distress and may need to reinvest in additional inventory. This characteristic further promotes our unfavorable price/fair value ratio.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. This outperformance may signify a bull trap, in light of other detractors from our model.

The narrow moat rating for this company indicates investors can expect it to generate 10 years or more of excess returns on capital due to its respectable competitive advantages. In addition, the company's moderate financial health score is decent and doesn't seriously concern us with regard to financial distress.