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Albemarle (ALB) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Analyze Albemarle (ALB) Piotroski F-Score for 2023. Discover key financial insights with a score of 4/9, highlighting profitability, liquidity & asset 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: 4

We're running Albemarle (ALB) 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?
0
Operating Cashflow are higher than Netincome?
0
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?
1

Albemarle (ALB) has a Piotroski F-Score of 4, which is a middling score indicating a moderate financial health. The score is derived by assessing 9 criteria relating to the company's profitability, liquidity, and operational efficiency. Albemarle shows strengths in positive net income, positive cash flow, decreasing leverage, and increasing asset turnover. However, the company struggles with decreasing return on assets, cash flow not surpassing net income, declining current ratio, slight share dilution, and a significant drop in gross margin.

Insights for Value Investors Seeking Stable Income

Given that Albemarle (ALB) has a Piotroski F-Score of 4 out of 9, it is essential for investors to exercise caution. While the company shows some financial strengths, there are notable concerns, particularly with its decreasing efficiency in using assets (ROA), lower gross margin, and declining liquidity. These red flags might suggest underlying issues that could affect future performance. Therefore, it’s recommended to conduct further comprehensive research or consider alternative stocks with stronger financial positions 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 Albemarle (ALB)

Company has a positive net income?

Net income refers to the total profit of a company after subtracting all expenses. A positive net income indicates profitability.

Historical Net Income of Albemarle (ALB)

Albemarle's net income in 2023 is $1,573,476,000, marking it as positive. This is a clear indication of profitability and thus adds 1 point to the Piotroski score. Analyzing the historical data reveals a trend of consistent profitability, especially notable in 2021 with $2,689,816,000 and maintaining a robust figure in 2023. This is a strong positive trend for financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is critical as it shows whether a company can generate sufficient positive cash flow to maintain and grow operations without resorting to external funding.

Historical Operating Cash Flow of Albemarle (ALB)

In 2023, Albemarle (ALB) reported a cash flow from operations of $1,325,321,000, which is positive. This is a significant indicator of financial health and capability in funding further operations and expansions. Historically, looking at the last 20 years' CFO data for Albemarle, the company has maintained a generally positive trend in cash flow, with a notable spike in 2022 reaching $1,907,849,000. Although there is a slight decrease this year compared to 2022, the overall trend remains strong. In terms of the Piotroski score, a positive CFO earns Albemarle 1 point, signaling robust operational cash generation.

Return on Assets (ROA) are growing?

Return on Assets (ROA) is a measure of a company's profitability relative to its total assets. A higher ROA indicates more efficient use of assets.

Historical change in Return on Assets (ROA) of Albemarle (ALB)

For Albemarle (ALB), the ROA has decreased from 0.2035 in 2022 to 0.0933 in 2023. This is a concerning trend, as a nearly halved ROA suggests that the company is using its assets less efficiently to generate profit compared to the previous year. Despite a historically strong operating cash flow, especially noteworthy in 2020 with $1,907.85 million, this dip could indicate emerging inefficiencies or external pressures. Compared to the industry median ROA of approximately 0.3018 for 2023, Albemarle is significantly underperforming. Thus, they score 0 points on this Piotroski criterion.

Operating Cashflow are higher than Netincome?

The criterion checks if the operating cash flow is higher than net income to validate if net income is supported by cash or not.

Historical accruals of Albemarle (ALB)

For the year 2023, Albemarle's Operating Cash Flow (OCF) stands at $1.325 billion, while the Net Income is higher at $1.573 billion. This results in an OCF to Net Income ratio below 1, earning a score of 0. Examining a longer historical context, Albemarle has often had fluctuating cash flows and net income with operational cash flow surpassing net income a few times but not consistently. The lower OCF compared to Net Income could indicate that earnings are not fully backed by cash flows, raising potential concerns regarding earnings quality. Therefore, for 2023, this criterion (Add 1 point if OCF > Net Income)) is not met and scores 0.

Liquidity of Albemarle (ALB)

Leverage is declining?

Change in leverage measures a company's financial risk by comparing its debt level changes over time.

Historical leverage of Albemarle (ALB)

Albemarle's leverage decreased from 0.2144 in 2022 to 0.2 in 2023, indicating a reduction in financial risk for the company. Thus, according to the Piotroski F-Score, this criterion earns Albemarle one point. Over the past 20 years, Albemarle's leverage fluctuated, peaking at 0.4256 in 2014 and reaching its lowest at 0.1646 in 2003. The current trend toward lower leverage reflects the company’s increased focus on a conservative capital structure, which is seen as a positive move by investors seeking lower risk exposure.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term obligations, indicating liquidity. A higher ratio is generally favorable.

Historical Current Ratio of Albemarle (ALB)

Comparing Albemarle's current ratio of 1.4652 for 2023 with 1.8923 in 2022, the current ratio has decreased. This suggests a decline in liquidity, now below the 2023 industry median of 1.9399, which may pose some concerns regarding short-term financial stability. Notably, Albemarle's current ratio has been trending downward after peaking at 3.702 in 2010.

Number of shares not diluted?

Change in Shares Outstanding assesses whether a company is issuing more shares or buying back its own stock.

Historical outstanding shares of Albemarle (ALB)

From 2022 to 2023, Albemarle’s outstanding shares increased slightly from 117,120,000 to 117,317,000. With an additional 197,000 shares, this represents a relatively minor dilution. When looking at the broader trend, Albemarle has steadily increased its outstanding shares over recent years, growing from 84,292,000 in 2003 to the current 117,317,000. However, share issuance can dilute existing shareholders' value. Given the increase in 2023, Albemarle does not score a point for this criterion, resulting in a score of 0. This pattern may reflect strategic capital raising efforts but warrants caution from investors concerned about dilution.

Operating of Albemarle (ALB)

Cross Margin is growing?

Change in Gross Margin compares current vs previous year. It measures profitability efficiency and cost control, impacting investor outlook.

Historical gross margin of Albemarle (ALB)

For Albemarle (ALB), the Gross Margin decreased from 0.42 in 2022 to 0.1233 in 2023. This is a significant contraction of approximately 70.64%. The year 2022 saw Albemarle's Gross Margin notably higher than the 20-year industry median of 0.3018. In 2023, however, Albemarle's Gross Margin plummeted considerably below the industry median for the first time in two decades. From 2003 to 2023, both Albemarle's and the industry's Gross Margins experienced fluctuations, but the stark decline in 2023 may raise serious questions among investors about the company’s cost structure, pricing power, or market conditions. This trend is unequivocally negative for the Gross Margin criterion, resulting in a score of 0.

Asset Turnover Ratio is growing?

The change in asset turnover measures how efficiently a company uses its assets to generate sales. An increase implies better efficiency.

Historical asset turnover ratio of Albemarle (ALB)

The asset turnover for Albemarle (ALB) has increased from 0.5539 in 2022 to 0.5703 in 2023. This improvement suggests that Albemarle has become more efficient in using its assets to generate revenue. Over the past 20 years, the asset turnover ratio has depicted a fluctuating trend, peaking at 0.9329 in 2006 and hitting a low of 0.3012 in 2016. The recent uptick in the asset turnover ratio is a positive sign and adds 1 point in the Piotroski framework. This trend indicates that the company's operational management is effective in enhancing asset utilization.


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