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Last update on 2024-06-07

Advanced Micro Devices (AMD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Explore AMD's Piotroski F-Score analysis for 2023, evaluating profitability, liquidity, and operational efficiency, scoring 6 out of 9.

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: 6

We're running Advanced Micro Devices (AMD) 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?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

Advanced Micro Devices (AMD) has been evaluated using the Piotroski F-Score criteria. AMD achieved a score of 6 out of 9, indicating a relatively strong financial position, though with some areas needing improvement. The company is profitable, with a positive net income of $854 million and positive cash flow from operations amounting to $1.667 billion. AMD has improved its liquidity, as evidenced by a rising current ratio and declining leverage, and has shown better gross margin efficiency. However, it has room for improvement in return on assets, share dilution, and asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Given AMD's Piotroski score of 6, the company presents itself as a potentially solid investment but comes with certain risks. The positive trends in profitability and cash flow generation are encouraging, and the improved liquidity reduces financial risks. However, the decline in return on assets and asset turnover ratio indicates there are operational areas to watch out for. Therefore, it's recommended for potential investors to consider AMD as a worthy candidate for further detailed analysis, paying special attention to its competitive position and operational efficiency strategies.

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

Profitability of Advanced Micro Devices (AMD)

Company has a positive net income?

Net income represents the company's profitability. A positive net income means profitability, while a negative indicates losses.

Historical Net Income of Advanced Micro Devices (AMD)

Advanced Micro Devices (AMD) has shown a positive net income of $854 million in 2023, indicating the company is profitable. Reviewing the historical data, AMD had several years of negative net income, particularly between 2006 and 2012, culminating in a loss of -$3.38 billion in 2007. From 2017 onwards, however, there has been a noticeable upward trend in profitability, with the highest net income marked in 2021 at $3.16 billion. This positive trend in net income signifies improved financial health and operational efficiency, reinforcing investor confidence.

Company has a positive cash flow?

Cash Flow from Operations (CFO): A positive CFO indicates that a company is generating more cash than it is spending, reflecting efficient operational efficiency.

Historical Operating Cash Flow of Advanced Micro Devices (AMD)

For Advanced Micro Devices (AMD), the Cash Flow from Operations in 2023 stands at $1,667,000,000, which is indeed positive. This positive trend in CFO adds 1 point under the Piotroski Analysis criterion. Historically, AMD has demonstrated a volatile trend in its CFO over the past 20 years. Notably, in the early 2000s and mid-2010s, AMD experienced several years of negative CFO, indicating struggles in liquidity and operational performance during those periods. However, the recent stability and positive CFO in latest years suggest improvements in operational efficiency and financial health. Overall, the positive CFO for 2023 reflects well on AMD's operational capabilities.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures how efficiently a company is using its assets to generate profit. It is calculated by dividing a company's net income by its total assets. An increasing ROA indicates improving efficiency and profitability, which is critical for assessing management effectiveness and overall business performance.

Historical change in Return on Assets (ROA) of Advanced Micro Devices (AMD)

In the case of Advanced Micro Devices (AMD), the ROA decreased from 0.033 in 2022 to 0.0126 in 2023, a decline indicating less efficient utilization of assets year over year. This trend is viewed negatively as it suggests the company is not using its assets as effectively to generate net income. When we consider the historical data, AMD's operating cash flows have seen significant fluctuations over the last 20 years, highlighting periods of both growth and struggle. Comparatively, the industry median ROA has been consistently higher than AMD’s, peaking at 0.4919 in 2023. This persistent underperformance points toward competitive challenges and potential areas for strategic improvements for AMD.

Operating Cashflow are higher than Netincome?

Operating cash flow being higher than net income indicates that a company's earnings are supported by actual cash flow, rather than accounting adjustments and non-cash items.

Historical accruals of Advanced Micro Devices (AMD)

In 2023, Advanced Micro Devices (AMD) recorded an operating cash flow of $1.667 billion, substantially higher than its net income of $854 million. This significant margin reflects positively on the company, highlighting robust cash flow generation from its operations. Particularly, this is a favorable trend, evidencing that AMD's earnings are not only substantial on paper but are also supported by real, liquid cash. Given the cyclical and volatile nature of the semiconductor industry, robust operating cash flow is crucial for a company like AMD to sustain R&D efforts, manage inventory, and navigate market uncertainties. Historically, there were years, such as 2008 and 2012, where AMD faced negative operating cash flows, resulting in substantial net losses. Therefore, the current positive cash flow generation underscores AMD's improved financial health, meriting an addition of 1 point based on the Piotroski criterion.

Liquidity of Advanced Micro Devices (AMD)

Leverage is declining?

Change in leverage evaluates the year-over-year shift in the company's debt levels relative to its equity. This is essential for assessing financial risk.

Historical leverage of Advanced Micro Devices (AMD)

The leverage ratio of AMD increased from 0.0332 in 2023 compared to 0.0424 in 2022. Since the leverage has actually decreased in 2023 (from 0.0424 to 0.0332), this means AMD's financial risk associated with debt levels has improved. Historically, AMD's leverage peaked at 0.6455 in 2015 and has shown a consistent downward trend over the years, reflecting increasingly conservative leverage practices. Overall, adding 1 point is justified based on the criterion of decreasing leverage.

Current Ratio is growing?

The current ratio compares a company's current assets to its current liabilities, indicating its ability to cover short-term debt with readily available resources.

Historical Current Ratio of Advanced Micro Devices (AMD)

Advanced Micro Devices (AMD) saw its current ratio rise from 2.3581 in 2022 to 2.5068 in 2023, signifying improved liquidity. This is beneficial as it indicates a strengthened ability to meet short-term obligations. Historically, AMD's current ratio has fluctuated. In 2008, it dipped to 1.0687, the lowest in 20 years, before generally trending upward, peaking in 2020 at 2.5416. Even though the industry median was 3.4213 in 2023, AMD's increasing trend is a positive indicator. Current ratio increased, adding 1 point.

Number of shares not diluted?

Change in Shares Outstanding refers to the variation in the number of shares that a company has issued and are currently held by shareholders. It is essential as it impacts earnings per share (EPS) and ownership dilution. A decrease typically is positive, indicating share buybacks.

Historical outstanding shares of Advanced Micro Devices (AMD)

From 2022 to 2023, the Outstanding Shares for AMD increased from 1,561,000,000 to 1,614,000,000. This increase indicates that there were no share buybacks and potentially more shares were issued. Thus, no point is awarded for this criterion. This trend is not primarily positive as increased shares can dilute the EPS. Over the last 20 years, AMD has generally seen an uptrend in Outstanding Shares from 346,934,000 in 2003 to 1,614,000,000 in 2023, reflecting capital raising efforts or stock-based compensation strategies. Consistent increases can dilute existing shareholders' ownership and earnings per share.

Operating of Advanced Micro Devices (AMD)

Cross Margin is growing?

Change in Gross Margin is a critical efficiency measure that reflects a company's ability to control the costs of its production. A higher Gross Margin indicates better profitability and financial health, given constant revenue conditions.

Historical gross margin of Advanced Micro Devices (AMD)

In 2023, Advanced Micro Devices (AMD) reported a Gross Margin of 0.4612, compared to 0.4493 in 2022. This reflects an improvement in Gross Margin by 0.0119 points or approximately 2.65%. A rising Gross Margin generally suggests improved cost efficiency and a more profitable production process, and for this criterion, AMD earns 1 point. Historically, the Gross Margin trend for AMD has shown variability; significant lows, such as the 0.2278 margin in 2012, indicating periods of cost structure inefficiency, but the company has demonstrated a sustained recovery. Further, AMD's Gross Margin of 0.4612 in 2023 still slightly trails the 2023 industry median Gross Margin of 0.4919, reflecting that while AMD is improving, it still has room for cost-structure optimization relative to its peers.

Asset Turnover Ratio is growing?

The asset turnover ratio measures the efficiency of a company's use of its assets to generate sales revenue.

Historical asset turnover ratio of Advanced Micro Devices (AMD)

In 2023, AMD has an asset turnover of 0.3348, compared to 0.59 in 2022. Clearly, the asset turnover has decreased, indicating lower efficiency in asset use to generate sales. Assessing the 20-year data, this is notably the lowest ratio, reflecting potential operational inefficiencies or substantial asset investments that have not proportionately translated to increased revenues. Therefore, the score is set to 0.


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