AMSWA 9.56 (+0.21%)
US0296831094SoftwareSoftware - Application

Last update on 2024-06-07

American Software (AMSWA) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

American Software (AMSWA) Piotroski F-Score analysis 2023 with a score of 3/9, assessing 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.
Learn more...

Short Analysis - Piotroski Score: 3

We're running American Software (AMSWA) 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?
0
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?
1
Asset Turnover Ratio is growing?
0

American Software (AMSWA) received a Piotroski F-Score of 3 out of 9, indicating potential weaknesses in its financial health. While AMSWA has some points of strength such as positive net income, decreasing leverage, and growing gross margin, it struggles with negative cash flow from operations, decreasing ROA, dilution of shares, decreasing asset turnover ratio, and a slightly declining current ratio. These weaknesses suggest issues with operational efficiency and liquidity, mixed with concerning recent trends.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, American Software (AMSWA) appears to have notable financial difficulties that could make it a risky investment. While the company does show some strengths in profitability and reducing leverage, its issues with cash flow, asset efficiency, and share dilution are concerning. As an investor, it might be prudent to look for alternatives or deeper analysis before committing to this stock.

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

Profitability of American Software (AMSWA)

Company has a positive net income?

Net Income (NI) indicates the overall profitability of a company after all expenses and taxes have been deducted from total revenue. Positive NI signifies a profitable company, which is crucial for sustainability and long-term growth.

Historical Net Income of American Software (AMSWA)

For American Software (AMSWA), the net income in 2023 is $10,421,000, which is positive. Historically, analyzing the provided net income data over the last 20 years shows a general positive trend in profitability with only minor fluctuations. Positive values are maintained year-on-year, which indicates consistent ability to generate profits. This trend is good as it reflects stable financial health and robust earnings capacity. Hence, AMSWA earns 1 point for this criterion in the Piotroski analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash a company generates or consumes from its regular business operations. It is crucial as it indicates the company's ability to sustain its operations and growth without relying on external financing.

Historical Operating Cash Flow of American Software (AMSWA)

In 2023, American Software's CFO was -$380,000, indicating a negative cash flow from operations. This suggests that the company spent more cash in its operations than it generated, which is considered unfavorable (0 points). Historical data shows variability in CFO: periods of strong cash flow, such as $29,020,000 in 2022, contrasted with years like 2010 when it was -$1,876,000. The current negative trend, particularly following a highly positive year, implies potential operational challenges or extraordinary expenses.

Return on Assets (ROA) are growing?

Compare the Return on Assets (ROA) over the past period to determine its trend. ROA is crucial as it measures a company's efficiency in generating profit from its assets.

Historical change in Return on Assets (ROA) of American Software (AMSWA)

Comparing the Return on Assets (ROA) for American Software between 2022 and 2023, the ROA decreased from 0.0691 in 2022 to 0.0537 in 2023. This decrease indicates a less efficient utilization of assets in generating earnings. Historically, the company's ROA fluctuated, but more concerning is that, in 2023, AMSWA's 0.0537 ROA significantly lags behind the industry's median of 0.6741. Thus, for the Piotroski Analysis, since ROA did not increase in 2023, the value for this criterion is set to 0, reflecting a negative trend for this accounting measure.

Operating Cashflow are higher than Netincome?

This criterion examines whether a company's operating cash flow exceeds its net income, indicating high-quality earnings.

Historical accruals of American Software (AMSWA)

For 2023, American Software (AMSWA) exhibits an operating cash flow of -$380,000 compared to a net income of $10,421,000. Evidently, the operating cash flow is significantly lower than net income, earning a score of 0 for this Piotroski criterion. This disparity undermines the quality of AMSWA's earnings for the year. Historically, AMSWA's operating cash flow was higher in many years, but recent shortfalls suggest liquidity issues impacting the firm’s ability to generate cash from its core activities.

Liquidity of American Software (AMSWA)

Leverage is declining?

Change in leverage measures the financial stability of a company by comparing its ratio of liabilities to equity over time.

Historical leverage of American Software (AMSWA)

Analyzing the given leverage data, American Software (AMSWA)'s leverage has decreased from 0.0024 in 2022 to 0.0003 in 2023. This reduction represents a positive trend in financial stability, indicating lower risk due to decreased reliance on debt financing. Therefore, AMSWA scores 1 point for reducing its leverage in 2023.

Current Ratio is growing?

The current ratio assesses a company's ability to pay short-term obligations with its short-term assets. An increasing current ratio generally signals a stronger liquidity position.

Historical Current Ratio of American Software (AMSWA)

For American Software (AMSWA), the current ratio in 2023 was 2.6785, which represents a slight decrease from the 2022 current ratio of 2.7169. This results in a net change of -0.0384. As such, the criterion was not met, resulting in a score of 0 for this metric. Examining the long-term trend from 2003 to 2023, American Software’s current ratio fluctuated but remained generally higher than the industry median throughout the entire period. For instance, the company's current ratio dipped to its lowest in 2015 at 2.1806 but remained well above that year’s industry median of 1.7196. By contrast, in 2004, AMSWA boasted a current ratio of 4.6727 against an industry median of 1.6121. Even as the ratio declined in 2023, it still stands markedly higher than the 2023 industry median of 1.7519, positioning American Software in a relatively favorable liquidity situation compared to its peers.

Number of shares not diluted?

Examining the change in outstanding shares for American Software (AMSWA) is critical as it indicates the extent of equity dilution or concentration. A decrease implies fewer shareholders, which can signal higher ownership value per share.

Historical outstanding shares of American Software (AMSWA)

For AMSWA, the outstanding shares increased from 33,365,000 in 2022 to 33,761,000 in 2023. Hence, instead of decreasing, the shares have grown, reflecting a 1.2% increase. This trend indicates dilution and receives 0 points, indicative of potential concerns for investors regarding share dilution, exploring issuance to raise capital, or stock-based compensations.

Operating of American Software (AMSWA)

Cross Margin is growing?

Gross margin compares sales revenue against the costs of goods sold, reflecting the core profitability of a company. An increasing gross margin indicates improving efficiency and profitability in core operations.

Historical gross margin of American Software (AMSWA)

In 2023, American Software's gross margin was 0.6008, up from 0.5942 in 2022. This represents an improvement in core profitability and efficiency. Over the last 20 years, American Software has shown a steady increase in gross margin with minor fluctuations. Although its gross margin generally trailed the industry median, the rise in 2023 is promising. Relative to the industry median gross margin of 0.6741 in 2023, AMSWA still has a margin to improve. Nevertheless, this year's increase is a favorable sign, earning 1 point in the Piotroski F-Score.

Asset Turnover Ratio is growing?

The change in asset turnover ratio assesses a company's ability to generate sales from its assets. This is crucial as a high ratio indicates efficient use of assets.

Historical asset turnover ratio of American Software (AMSWA)

The Asset Turnover ratio for American Software (AMSWA) has decreased from 0.6895 in 2022 to 0.6367 in 2023, indicating less efficient use of assets in generating revenue. Comparing these against past trends, we observe a fluctuating yet downward trajectory from a peak value of 0.9272 in 2012. Given this decline, AMSWA earns 0 points for this criterion, as a decrease in the ratio typically signals inefficiencies and potential profitability concerns.


Obligatory risk notice

We would like to point out that the contents of this website are for general information purposes only and do not constitute recommendations for the purchase or sale of specific financial instruments, and therefore do not constitute investment advice. In particular, marketstorylabs.com and its creators cannot assess the extent to which information / recommendations made on the pages correspond to your investment objectives, your risk tolerance and your ability to bear losses. Therefore, if you make any investment decisions based on information on the site, you do so solely on your own responsibility and at your own risk. This in turn means that neither marketstorylabs.com nor its creators are liable for any losses incurred as a result of investment decisions based on the information on the marketstorylabs.com website or other media used.