The companies that made my list had three things going against them: 1) high total debt to earnings before interest, taxes, depreciation and amortization (EBITDA), 2) a low return on assets and 3) an Altman Z-Score below 1.81 — a sign the company could file for bankruptcy over the next 24 months.
According to Morningstar, one of the largest travel booking companies by volume has a total debt of $4.82 billion, 582x its EBITDA of $8.28 million, a return on assets of -12.52% and an Altman Z-Score of -0.43.
In 2015, Sabre (NASDAQ:SABR) stock traded around $30, 7x higher than where it currently trades.
Through the first nine months of 2023, Sabre generated a non-GAAP loss of $135.4 million, down from a $254.4 million loss a year earlier, on $2.2 billion in revenue.
The bulls will point to the fact its adjusted EBITDA margin was 10.9%, 750 basis points higher than a year ago, a sign the business is coming around.
But is it?
Its interest expense in the third quarter was $119.4 million, 55% higher than Q3 2022. On an annualized basis, that’s $478 million, 62% higher than its interest expense in 2022.
That’s a huge mountain to overcome.
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