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Last update on 2024-06-07

Adtran (ADTN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 2/9)

Discover Adtran's (ADTN) Piotroski F-Score Analysis for 2023, scoring 2/9. Evaluate profitability, liquidity, and operating efficiency metrics in this detailed review.

Knowledge hint:
The Piotroski F-Score is a number between 0 to 9 which reflects the strength of a company's financial position. It is based on 9 criteria involving profitability, liquidity, and leverage. This model helps investors identify stocks that are strong, undervalued investments.
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Short Analysis - Piotroski Score: 2

We're running Adtran (ADTN) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
0
Company has a positive cash flow?
0
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

The Piotroski F-Score is a rating between 0 to 9 that evaluates a company's financial situation based on nine different criteria. Adtran (ADTN) was analyzed using this scoring system, which focuses on profitability, liquidity, and efficiency. For profitability, Adtran struggled: they had a negative net income, declining ROA, and negative operating cash flow, although their cash flow was better than their net income. In terms of liquidity, Adtran had mixed results: they had an improved current ratio but increased leverage and diluted shares outstanding, which are concerning. In operations, Adtran's gross margin and asset turnover both declined, indicating they are becoming less effective at managing costs and using assets to generate revenue. Overall, Adtran scored a 2 out of 9 on the Piotroski scale, reflecting significant concerns about their financial health and performance.

Insights for Value Investors Seeking Stable Income

Given Adtran's low Piotroski F-Score of 2, it appears that their financial health is weak across several important criteria. This low score suggests that Adtran has underlying financial challenges, including negative profitability metrics, decreasing efficiency, and increased debt. As an investor, you should be cautious and consider these factors before making any investment decisions. It may be wise to either look for more financially stable companies or undertake deeper investigation into why Adtran is underperforming and if they have potential strategies to improve their financial status.

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

Profitability of Adtran (ADTN)

Company has a positive net income?

Explain the criterion for Adtran (ADTN) and why it is important to consider

Historical Net Income of Adtran (ADTN)

Net income is a measure of the company's profitability. A positive net income indicates that a company is generating more revenue than expenses, while a negative net income suggests that expenses are greater than revenue. For Adtran (ADTN), this is a crucial measure of its financial health and sustainability.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the amount of cash generated by a company's regular business operations. It is essential as it shows how well the company can generate cash to meet its obligations and invest in its future growth.

Historical Operating Cash Flow of Adtran (ADTN)

In 2023, Adtran's Cash Flow from Operations (CFO) is -$45,604,000, which is negative. Consequently, it does not add a point to Piotroski's scoring system. Over the last 20 years, the CFO has exhibited fluctuations, with significant drops in 2017, 2019, and the most recent past three years, 2021-2023, all showing negative values. The trend indicates worsening operational cash generation, which could be alarming for investors seeking steady cash flows to assure business sustainability and growth. This negative trend signifies the company's deteriorating ability to generate cash from its operations, posing risks to its financial health and investor returns.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) evaluates the company’s ability to increase efficiency in generating profits from its assets. A positive change in ROA is a strong indicator of improved financial performance.

Historical change in Return on Assets (ROA) of Adtran (ADTN)

For Adtran (ADTN), the ROA in 2023 was -0.1476, a decline from -0.0016 in 2022. This drop in ROA indicates decreasing efficiency in generating profits from the company's assets. ROA has diminished by 9090% year-on-year, which is alarming. Over the past two decades, Adtran’s ROA consistently lagged behind the industry median, which was substantially positive, often exceeding 35%. For example, the industry median ROA in 2023 was 39.03%, highlighting a robust sector performance in stark contrast to Adtran’s negative ROA trend. The lowered ROA attracts no point in the Piotroski score.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a qualitative criterion in Piotroski analysis where scoring is favorable when cash flow from operations exceeds net income, indicating strong earnings quality.

Historical accruals of Adtran (ADTN)

In 2023, Adtran reported an Operating Cash Flow of -$45,604,000 and a Net Income of -$267,688,000. Since the Operating Cash Flow is higher than the Net Income, this criterion scores a 1 point, which is positive. The chart data shows varied trends over the last 20 years, with notable fluctuations indicating periods of both strong and weak operational performance.

Liquidity of Adtran (ADTN)

Leverage is declining?

Change in Leverage compares the previous year's leverage to the current year to determine if the company has improved its financial stability by decreasing its debt levels relative to its equity.

Historical leverage of Adtran (ADTN)

For Adtran (ADTN), the leverage has increased from 0.0426 in 2022 to 0.1346 in 2023. This indicates that the company has taken on more debt relative to its equity, which is typically seen as a negative trend in this context. Historically, Adtran's leverage has fluctuated, but the most recent increase to 0.1346 in 2023 from 0.0426 in 2022 marks a significant rise. Therefore, Adtran does not score a point for this criterion.

Current Ratio is growing?

Examines the shift in a company's ability to cover short-term obligations, vital for understanding liquidity trends.

Historical Current Ratio of Adtran (ADTN)

The Current Ratio of Adtran (ADTN) has increased from 2.0588 in 2022 to 2.6362 in 2023, marking an improvement in liquidity. A higher Current Ratio reflects better short-term financial health, allowing ADTN to cover its short-term liabilities more effectively. Historically, compared to the industry median, ADTN often showcased ratios significantly above industry norms, although there was a trend of decline over the past 20 years. Notably, this recent improvement in 2023 brings ADTN's Current Ratio back above that of the industry, which stands at 1.8276, indicating a positive development and thus earning 1 Piotroski point.

Number of shares not diluted?

Examining the change in shares outstanding is crucial as it can affect per-share metrics and signify the company's capital structure decisions.

Historical outstanding shares of Adtran (ADTN)

In 2022, Adtran had 62,346,000 shares outstanding, which increased to 78,416,000 shares in 2023. This represents a substantial increase in shares outstanding by 16,070,000 shares. An increase in shares typically dilutes the value of existing shares, which can be detrimental to shareholders. Based on this criterion, the score would be 0. The historical data shows a fluctuating trend, punctuated by periods of share buybacks and issuances. Given the considerable jump in 2023, the primary concern would be the reason behind this issuance, such as acquisitions or capital raising, which warrants further investigation.

Operating of Adtran (ADTN)

Cross Margin is growing?

Gross Margin measures the percentage of revenue that exceeds the cost of goods sold, reflecting the management's control over costs.

Historical gross margin of Adtran (ADTN)

Comparing Adtran's (ADTN) gross margin of 0.2898 in 2023 with the previous year's figure of 0.3191 in 2022, we observe a decrease, not an increase. This translates to a decline in gross margin, effectively reducing one point in the Piotroski analysis. Over the past 20 years, Adtran's gross margin has seen a steady decline from as high as 0.5596 in 2003 to the current figure of 0.2898 in 2023. This persistent downward trend highlights worrying signs of diminished pricing power or increased costs. While the industry's gross margin for 2023 stands at 0.3903, Adtran is notably underperforming, suggesting competitive pressures or inefficient cost management. Therefore, for this criterion, the point is set at 0.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets in generating sales revenue. It is calculated by dividing sales by total assets.

Historical asset turnover ratio of Adtran (ADTN)

In 2023, Adtran's Asset Turnover stood at 0.6338, showing a decrease from 0.8163 in 2022. This downward trend suggests a decline in the company's efficiency in generating sales from its assets. This is further corroborated by the historical data over the last 20 years, where the lowest Asset Turnover ratio of 0.6338 in 2023 indicates potential operational inefficiencies or decreasing sales figures. This lower figure does not add a point to the Piotroski Score, resulting in 0 points for this criterion.


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