Last update on 2024-06-04

Deutsche Telekom (0MPH.IL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Deutsche Telekom (0MPH.IL) Piotroski F-Score Analysis for 2023: Achieved a score of 6 out of 9, highlighting financial strengths and areas needing improvement.

Short Analysis - Piotroski Score: 6

We're running Deutsche Telekom (0MPH.IL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Deutsche Telekom evaluated against the Piotroski F-Score received a score of 6 out of 9. The analysis considered several factors: profitability, liquidity, and efficiency. The company's net income and cash flow from operations are strong, each earning a point. Its return on assets showed improvement, though it still lags behind industry standards. Positive cash flow relative to net income, a growing current ratio, and an increasing gross margin are additional strengths. However, the company falls short in three areas: increasing leverage, dilution of shares outstanding, and decreasing asset turnover.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis resulting in a score of 6, Deutsche Telekom presents a moderately strong financial position with key positives in profitability and liquidity but has areas that need improvement, like leverage, shares dilution, and asset efficiency. Investors might find Deutsche Telekom attractive due to its robust cash flows and improving financial conditions, but should also be cautious due to its increasing debt and share dilution. It's worth conducting more in-depth research into the company's strategic plans for managing these weaker areas. Overall, it could be worth considering for a balanced portfolio, especially for those focused on telecom industry plays.

For those who are interested in delving deeper into the specifics, the subsequent section provides a comprehensive exploration of the criteria.

Profitability of Deutsche Telekom (0MPH.IL)

Company has a positive net income?

Net income is a crucial indicator of a company's profitability over a specific period. If net income is positive, a point is added.

In 2023, Deutsche Telekom's net income stands at €17.788 billion, which is significantly positive. This represents a notable improvement compared to the previous 20 years. The trend showcased a drastic shift in net income post-2012 with substantial growth, culminating in this remarkable figure in 2023. The net income ranged from a low of -€5.255 billion in 2012 to a high of €8.001 billion in 2022. This rapid rise to €17.788 billion in 2023 highlights robust financial health and excellent company performance. Thus, for the Piotroski score, a point is awarded, making this criterion very favorable for investors.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a measure of the cash generated by a company's normal operating activities. It's important as it indicates the company’s ability to generate sufficient positive cash flow to maintain and grow its operations.

The CFO for Deutsche Telekom in 2023 stands at €37.3 billion, which is indeed positive. Adding to this, an examination of the last 20 years reveals a consistent upward trend in CFO, significantly increasing from €14.3 billion in 2003. This positive and robust progression reflects a strong and steadily improving ability to generate cash from its core operations. Therefore, under the Piotroski Analysis criteria, Deutsche Telekom earns 1 point for CFO.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. It's crucial as it indicates how efficient management is at using assets to generate profit.

Deutsche Telekom's ROA increased from 0.0276 in 2022 to 0.0604 in 2023, indicating improved efficiency in utilizing its assets to generate profit. This upward trend is favorable, as companies with a higher ROA are generally better at converting investments into earnings. Over the last 20 years, Deutsche Telekom's operating cash flow consistently improved from 14.29 billion in 2003 to 37.30 billion in 2023. However, while the industry median ROA also showed an improvement, Deutsche Telekom's ROA significantly lags the industry median, which was 0.6122 in 2023. Despite the positive trend, Deutsche Telekom's ROA still has considerable ground to cover to match the industry standard.

Operating Cashflow are higher than Netincome?

The criterion 'Operating Cash Flow higher than Net Income' checks if a company is consistently generating strong cash flows compared to its accounting profit.

For Deutsche Telekom in 2023, the operating cash flow is €37.298 billion, significantly higher than the net income of €17.788 billion. This strong cash flow generation relative to net income indicates a healthy cash conversion cycle and operational efficiency. Over the past two decades, the company has shown a notable upward trend in operating cash flows from around €14.29 billion in 2003 to the current level, without significant fluctuations. On the other hand, net income has also shown growth, albeit with more volatility, particularly noting the significant negative income in 2012. This consistency in cash flow is a positive indicator, granting this criterion a score of 1 point.

Liquidity of Deutsche Telekom (0MPH.IL)

Leverage is declining?

The Change in Leverage criterion analyzes whether a company has reduced its leverage (debt to assets ratio) compared to the previous year. A decrease in leverage is considered positive as it generally indicates a lower financial risk.

Deutsche Telekom's leverage has increased in 2023 to 0.439 from 0.4332 in 2022. This represents an upward trend in leverage, suggesting that the company's financial risk has slightly increased. Over the last 20 years, notable was the trend of leverage stabilizing between 2015 and 2021, but the uptick in leverage in 2023 signals that the company has taken on relatively more debt compared to its assets. Consequently, this criterion does not award Deutsche Telekom a point, highlighting increased financial risk. Therefore, the score for this criterion is 0.

Current Ratio is growing?

Current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. A higher ratio indicates better liquidity

In 2023, Deutsche Telekom's current ratio increased to 1.0083 from 0.8624 in 2022. This reflects an improvement in the company's liquidity position, suggesting it is better equipped to meet its short-term liabilities. Comparing this with the industry median for 2023, which stands at 0.9574, Deutsche Telekom is slightly above the industry average, indicating healthy operational efficiency. Historically, Deutsche Telekom has experienced fluctuations in its current ratio, but the recent increase to over 1.0 represents a positive trend. Thus, we add 1 point for this criterion. The upward trend boosts confidence in the company’s financial robustness: 2023 (1.0083), 2022 (0.8624), 2021 (0.9999), 2020 (1.0043), 2019 (0.7501).

Number of shares not diluted?

Change in Shares Outstanding refers to whether the company has bought back any of its shares or issued new ones. A decrease suggests the company is buying back shares, which could be positive as it may indicate confidence from the management in the company's future profitability.

Comparing the Outstanding Shares of Deutsche Telekom, we observe an increase from 4,972,000,000 in 2022 to 4,976,000,000 in 2023. Given the criterion in Piotroski's analysis, this results in 0 points for this category since the increase in shares is often perceived as dilution of company ownership. Over the last 20 years, shares outstanding have generally trended upwards, indicating that the company has been issuing more shares over time. This upward trajectory peaked significantly in recent years from 4,312,000,000 in 2012 to 4,976,000,000 in 2023, which further points to shareholder dilution rather than buyback initiatives.

Operating of Deutsche Telekom (0MPH.IL)

Cross Margin is growing?

Gross Margin is a key profitability metric that indicates the percentage of revenue remaining after deducting the cost of goods sold. A higher Gross Margin suggests better efficiency and profitability.

Deutsche Telekom's Gross Margin increased significantly from 0.5595 in 2022 to 0.6003 in 2023, representing an upward trend. This increase is a positive indication of improved cost management and enhanced revenue retention. Comparing against the industry median Gross Margin of 0.6122 for 2023, Deutsche Telekom is slightly below but close. Historical data shows a substantial improvement from as low as 0.3849 in 2014. Therefore, for the Piotroski F-Score, we assign 1 point for the increase in Gross Margin, which showcases a favorable trend in financial health and operational efficiency.

Asset Turnover Ratio is growing?

The Asset Turnover indicates the efficiency with which a company uses its assets to generate sales. A higher ratio demonstrates better efficiency.

Deutsche Telekom's Asset Turnover decreased from 0.3916 in 2022 to 0.378 in 2023. Historically, this metric has seen a decline since 2009, when it was 0.5143. Given the continual downward trend, this inefficiency in utilizing assets to generate revenue calls for strategic reassessment. Thus, with the decline observed, no points are allocated for this criterion.