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Last update on 2024-06-06

Allegion (ALLE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Allegion (ALLE) receives a 7/9 in the 2023 Piotroski F-Score analysis, indicating strong financial health and efficient operations.

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: 7

We're running Allegion (ALLE) 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?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

Allegion (ALLE) has a Piotroski F-Score of 7 out of 9, indicating a strong financial position. Their profitability is solid with a consistently positive net income and cash flow from operations exceeding net income, showing high earning quality. Return on Assets (ROA) is slightly improving, though still below industry median. Liquidity shows mixed results: decreased leverage is positive but a declining current ratio is concerning. Operationally, Allegion has improved gross margin but deteriorating asset turnover.

Insights for Value Investors Seeking Stable Income

Given Allegion’s Piotroski F-Score of 7, it is generally a strong candidate for investment. The company shows solid profitability and good cash flow management. However, potential investors should be aware of challenges with liquidity and operational efficiency. Further analysis on their liquidity issues and declining asset turnover is recommended 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 Allegion (ALLE)

Company has a positive net income?

Net income, a company's total earnings, directly impacts its ability to reinvest and grow. For Allegion (ALLE), having a positive net income is essential as it signals profitability and financial health.

Historical Net Income of Allegion (ALLE)

In 2023, Allegion's net income stands at $540.4 million, which is positive. This marks an upward trend from the previous years, with figures like $458 million in 2022 and $483 million in 2021. The net income trend over the past two decades indicates a generally increasing pattern, reinforcing confidence in the company’s financial fortitude. Therefore, Allegion earns a full point for having a positive net income in 2023.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures a company's ability to generate cash from its regular operating activities and is crucial for assessing financial health.

Historical Operating Cash Flow of Allegion (ALLE)

In 2023, Allegion (ALLE) reported a positive CFO of $600.6 million. This positive cash flow trend is significantly better compared to previous years, where CFO stood at $459.5 million in 2022 and has been on a general upward trend over the last 14 years. The highest CFO prior was $490.3 million in 2020. Hence, a positive CFO signifies better operational efficiency and adds 1 point in the Piotroski Analyses.

Return on Assets (ROA) are growing?

ROA, or Return on Assets, signifies how profitable a company is relative to its total assets. An increasing ROA suggests improving efficiency.

Historical change in Return on Assets (ROA) of Allegion (ALLE)

For Allegion (ALLE), the ROA increased marginally from 0.1301 in 2022 to 0.1302 in 2023. Although this uptick is very slight, it indicates a positive, albeit minimal, improvement in the company's efficiency in utilizing its assets. This trend is generally considered favorable as it implies that Allegion is getting somewhat better at generating profits from its assets. While the increase is modest, it is essential to note how this aligns with historical performance and industry standards. By comparison, the median ROA for the industry has been fluctuating but remains significantly higher in 2023 at 0.4207, which suggests there is still room for Allegion to improve. Factoring in this information, it would be fair to assign 1 point based on this criteria, while acknowledging the necessity for further improvements to reach at least the industry median.

Operating Cashflow are higher than Netincome?

Indicate whether the company's operating cash flow exceeds its net income, a sign of high earnings quality.

Historical accruals of Allegion (ALLE)

With an operating cash flow of $600.6 million and a net income of $540.4 million in 2023, Allegion shows a positive trend. This difference signifies that the cash flow generated from operations exceeds the reported earnings, suggesting that Allegion converts its revenue into cash effectively. Historically, Allegion's operating cash flow has shown a consistent upward trend, growing from $223.9 million in 2013 to $600.6 million in 2023, reflecting strong operational efficiency. This criterion receives a score of 1, indicating financial robustness.

Liquidity of Allegion (ALLE)

Leverage is declining?

Leverage measures a company's debt levels and financial risk. Lower leverage indicates better financial health and stability.

Historical leverage of Allegion (ALLE)

Allegion’s leverage decreased from 0.5216 in 2022 to 0.3717 in 2023, indicating an improvement in financial health. This is particularly noteworthy when compared with its historical leverage data. Since 2010, Allegion’s leverage has seen fluctuations, but the significant decline to 0.3717 in 2023 is a positive trend. This reduction in leverage suggests that the company is becoming less reliant on debt, reducing financial risk and potentially enhancing stability. Therefore, Allegion merits an additional point for this improvement.

Current Ratio is growing?

Current Ratio measures a company's ability to pay short-term obligations with its short-term assets.

Historical Current Ratio of Allegion (ALLE)

The Current Ratio for Allegion decreased from 1.7263 in 2022 to 1.2604 in 2023. This is a negative trend as it reflects a lower ability of the company to cover its short-term liabilities using its short-term assets. Furthermore, the median current ratio for the industry in 2023 stood at 1.7987, suggesting that Allegion is now significantly below the industry benchmark. A lower current ratio combined with being below the industry median highlights potential liquidity issues. Hence, this criterion scores 0 points.

Number of shares not diluted?

Change in shares outstanding indicates the dilution effect. A decrease in shares outstanding is considered positive as it often results in higher EPS.

Historical outstanding shares of Allegion (ALLE)

The Outstanding Shares of Allegion (ALLE) decreased from 88,000,000 in 2022 to 87,900,000 in 2023. This is a negligible decrease of 0.11%, indicating a share buyback or similar action. Generally, this is positive as it suggests a reduction in share dilution and could slightly enhance the Earnings Per Share (EPS). Hence, Allegion earns 1 point for this criterion.

Operating of Allegion (ALLE)

Cross Margin is growing?

This criterion measures the change in gross margin, indicating the company's ability to maintain cost control and pricing power over time.

Historical gross margin of Allegion (ALLE)

In 2023, Allegion's gross margin was 0.4332 compared to 0.4042 in 2022, marking an increase. This improvement suggests enhanced cost control and better pricing power, deserving a score of 1. The gains are even more significant against the industry median of 0.4207 in 2023. Over the past decade, Allegion’s gross margin consistently outperformed the industry median, except for minor deviations, reaffirming its operational efficiency.

Asset Turnover Ratio is growing?

The criterion examines whether a company is effectively using its assets to generate revenue. An increase in asset turnover implies better efficiency and is a positive sign for investors.

Historical asset turnover ratio of Allegion (ALLE)

The Asset Turnover for Allegion (ALLE) has decreased from 0.9292 in 2022 to 0.8794 in 2023. Over the past 20 years, the company's Asset Turnover has fluctuated but has generally followed a downward trend since 2014. This decrease in 2023 aligns with the historical trend of declining Asset Turnover. However, this is not a favorable sign in terms of operational efficiency, suggesting that the company is generating less revenue per dollar of assets compared to the previous year. This results in a score of 0 for this criterion.


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