AES 18.89 (+1.29%)
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Last update on 2024-06-05

AES (AES) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Piotroski F-Score analysis for AES (AES) in 2023, scoring 5 out of 9. Assessing financial health through profitability, liquidity, and operational efficiency.

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: 5

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

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

The Piotroski F-Score rating for AES (AES) stands at a moderate 5 out of 9, illustrating a mix of strengths and weaknesses in the company’s financial health. Profitability is solid for 2023 with a positive net income ($249M) and strong cash flows from operations ($3,034M). Return on Assets (ROA) has shown significant improvement, and operating cash flow exceeds net income. However, there is an increased leverage and a concerning decline in current ratio, indicating rising risk and potential liquidity issues. Dilution is also a problem as outstanding shares have increased. Moreover, both gross margin and asset turnover have worsened compared to the previous year along with historically low figures, suggesting efficiency issues.

Insights for Value Investors Seeking Stable Income

AES has a moderate Piotroski F-Score, making it neither an exceptionally strong nor weak candidate for investment. While the firm shows promising profitability metrics and operating cash flow, the increased leverage, diluted shares, and declining liquidity and efficiency ratios are causes for concern. Investors should tread carefully, analyzing further whether the company's current strengths can outweigh its weaknesses in financial and operational aspects before making an investment decision.

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

Profitability of AES (AES)

Company has a positive net income?

Net income is a company's total earnings and is crucial to assessing its profitability.

Historical Net Income of AES (AES)

For AES (AES), the net income in 2023 is $249,000,000 which is positive and thus, earns a point. Evaluating the net income over the past 20 years, AES has shown significant volatility in its profitability, with several years of negative income (e.g., -$403M in 2003, -$912M in 2012, -$1.1B in 2017). This uneven performance raises caution for analysts, although the positive net income in 2023 is a good sign. Given the erratic nature of past results, consistent future earnings would be imperative for a more favorable outlook.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) indicates the amount of cash a company generates from its regular operational activities. It is a key indicator used in the Piotroski Analysis because it shows the financial health and core operating efficiency of a company.

Historical Operating Cash Flow of AES (AES)

The Cash Flow from Operations (CFO) for AES (AES) in 2023 is $3,034 million, which is positive. This contributes positively to the Piotroski score, adding 1 point. Over the last 20 years, AES has shown consistent positive CFO values, with significant peaks in certain years such as 2010 ($3,510 million), 2011 ($2,884 million), and 2023 ($3,034 million). The trend indicates a generally stable and strong ability to generate cash flow from operations, reflecting financial robustness and operational efficiency. Thus, this is a favorable trend for AES.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) measures the company's trend in profitability relative to its total assets. A higher ROA indicates more efficient use of assets to generate earnings.

Historical change in Return on Assets (ROA) of AES (AES)

In 2023, AES (AES) reported an ROA of 0.006 compared to -0.0153 in 2022. This notable increase demonstrates a significant improvement in asset utilization for generating earnings. Historically, over the past 20 years, AES's ROA has shown variability, with operating cash flow ranging notably. Meanwhile, the industry median remained comparatively steady above 0.3, peaking at 0.5221 in 2007. Compared to the industry median ROA of 0.3416 in 2023, AES still lags behind, indicating room for growth. Nevertheless, this positive trend from a negative ROA is a promising sign and adds 1 point to the Piotroski Score.

Operating Cashflow are higher than Netincome?

This criterion examines whether a company has robust cash generation compared to its net income. It helps assess the quality of earnings.

Historical accruals of AES (AES)

For AES (AES), in 2023, the operating cash flow stands at $3.034 billion, while net income is $249 million. As the operating cash flow surpasses net income substantially, it indicates strong cash generation relative to reported profits, earning 1 point for this criterion. Historically, AES has shown variable net incomes, highlighting the importance of this reliability in operating cash flow.

Liquidity of AES (AES)

Leverage is declining?

Change in Leverage examines the shift in a company’s debt levels from one year to the next. It is vital since rising leverage denotes higher risk, while falling leverage indicates lower financial risk.

Historical leverage of AES (AES)

In 2023, the leverage for AES Corporation has increased to 0.5077 from 0.5667 in 2022. This represents a boost in leverage by approximately 0.059. Given previous years' leverage data, this is notable since the leverage was generally reducing before 2022, hovering around 0.5258 in 2021. An increase in leverage is negative because it points towards an increment in the company’s debt obligations, potentially upping the firm’s risk in meeting its financial commitments.

Current Ratio is growing?

The Current Ratio examines a company's ability to pay off its short-term liabilities with its short-term assets. It's a key measure of liquidity.

Historical Current Ratio of AES (AES)

In 2023, AES Corporation's Current Ratio stood at 0.6833, a decrease from 1.1775 in 2022. Historically, AES's ratio has mostly stayed above 1.0 in the past 20 years, with some minor dips below, underscoring the company's typically strong liquidity position. However, a stark dip to 0.6833 signifies potential liquidity challenges. Comparing to the industry median for 2023 (0.8538), AES's liquidity seems noticeably weaker. As the ratio did not increase, 0 points are added.

Number of shares not diluted?

Change in Shares Outstanding reflects whether a company has issued or repurchased its stock. It is crucial for evaluating shareholder value and dilution.

Historical outstanding shares of AES (AES)

AES (AES) saw its outstanding shares increase from 668 million in 2022 to 669 million in 2023. This uptick in shares outstanding signifies a dilution of shareholder value because the share pool is expanding, meaning the ownership stake of each individual share decreases. Over the last two decades, AES has generally observed fluctuating outstanding shares, peaking at 783 million in 2011 and bottoming out at 601 million back in 2003. Given this scenario, according to Piotroski's F-Score metric, AES would score a 0 for this criterion because the shares outstanding have increased in 2023.

Operating of AES (AES)

Cross Margin is growing?

This criterion compares the company's gross margin year-over-year to assess profitability trends. A higher gross margin indicates improved efficiency and cost management.

Historical gross margin of AES (AES)

AES's gross margin has decreased slightly to 0.1977 in 2023 from 0.2019 in 2022. This is not a positive indicator as it's a reduction in profitability. Considering long-term trends, AES has historically lower gross margins compared to the industry median, which in 2023 is 0.3416. This consistent underperformance highlights ongoing challenges in cost control or pricing strategies.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales and is crucial to evaluate operational performance.

Historical asset turnover ratio of AES (AES)

In 2023, AES (AES) had an Asset Turnover of 0.3047, indicating a decrease from 0.3538 in 2022. This decline suggests that the company is generating fewer sales per dollar of assets compared to the previous year, adversely affecting operational efficiency and hence, it scores 0 points in this criterion. Reviewing historical data over the last 20 years, the Asset Turnover peaked at 0.4641 in 2008 and has seen fluctuations with a gradual decline since, manifesting underlying operational challenges.


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