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Last update on 2024-06-07

Amazon.com (AMZN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Amazon Piotroski F-Score Analysis for 2023 shows a solid score of 7/9, indicating strong financials 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: 7

We're running Amazon.com (AMZN) 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?
1
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

The Piotroski F-Score is a measure that evaluates a company's financial position out of 9, based on profitability, liquidity, and leverage criteria. Amazon scored 7 out of 9. Here's a quick look at the results: Amazon has shown strong profitability and cash flow in 2023, with significant net income and high operating cash flow compared to net income. Its return on assets has improved, indicating efficient use of resources. These factors highlight a financially solid and profitable company. On the downside, Amazon's leverage has increased, suggesting higher debt levels, and there’s slight dilution from the increase in outstanding shares. Lastly, Amazon's current ratio has improved, indicating better liquidity, but the asset turnover ratio slightly decreased, meaning less efficient use of assets despite overall financial growth.

Insights for Value Investors Seeking Stable Income

Given Amazon's Piotroski F-Score of 7, it appears to be a strong and potentially undervalued investment worth considering. The company demonstrates impressive profitability and cash flow strength, although potential investors should keep an eye on the increase in leverage and the dilution of shares. Overall, it shows promising signs of financial health and operational efficiency, but prospective investors should always consider these alongside other factors and analyses.

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

Profitability of Amazon.com (AMZN)

Company has a positive net income?

Net income, the bottom line of a firm's income statement, shows profitability by deducting total expenses from total revenue. Having positive net income is vital for evaluating overall financial health.

Historical Net Income of Amazon.com (AMZN)

Amazon.com (AMZN) has reported a net income of $30.425 billion in 2023. This figure secures a positive point according to the Piotroski Analysis, affirming the company's profitability. With last year's net income of -$2.722 billion marking a significant loss, the turnaround to a substantial net profit highlights an impressive recovery and potentially healthier financial positioning this year.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the amount of cash generated by a company's regular business operations. It is important to consider.

Historical Operating Cash Flow of Amazon.com (AMZN)

The CFO for Amazon in 2023 is $84.95 billion, which is a positive figure. This marks a substantial increase from prior years. Over the past two decades, Amazon has consistently shown increasing CFO, underscoring its ability to generate cash from its business operations. For the year 2023, Amazon definitely earns 1 point for a positive CFO. This is indicative of a robust and growing operational foundation.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures the profitability of a company relative to its total assets. A higher ROA indicates more efficient usage of assets to generate earnings.

Historical change in Return on Assets (ROA) of Amazon.com (AMZN)

In 2023, Amazon.com's ROA increased to 0.0614 from -0.0062 in 2022, marking a significant enhancement in profitability and asset efficiency. This change adds 1 point in the Piotroski Analysis and is a positive trend, suggesting that Amazon has managed to turn its investments into profit more effectively this year compared to the previous year. Despite an industry median ROA fluctuating around 0.36 over the past two decades, Amazon's upward trajectory in ROA is a promising sign amidst competitive pressures.

Operating Cashflow are higher than Netincome?

The criterion compares operating cash flow to net income to assess earnings quality and the firm's ability to generate cash from its operating activities.

Historical accruals of Amazon.com (AMZN)

In 2023, Amazon.com (AMZN) reported an operating cash flow of $84.95 billion compared to a net income of $30.42 billion. The operating cash flow is significantly higher than net income, suggesting robust cash generation from its core operations. This is a positive sign and can be awarded 1 point based on the Piotroski Score criteria. This indicator is crucial for understanding the company's earnings quality and its capability to manage and generate sufficient cash flow. Over the years, Amazon has exhibited a strong growth in operating cash flow, reinforcing its profitability and operational efficiency.

Liquidity of Amazon.com (AMZN)

Leverage is declining?

Change in leverage is the ability of a company to manage its overall debt levels over time. A decrease is viewed as a positive indicator, reflecting better financial health.

Historical leverage of Amazon.com (AMZN)

Evaluating Amazon's change in leverage ratio from 2022 to 2023, we see an increase from 0.2569 to 0.3028, which indicates that Amazon has taken on more debt. This is unfavorable in the context of Piotroski's analysis as increasing leverage generally points to potential financial risk. Despite the increase, Amazon's historical leverage has shown significant fluctuations, reaching a low of 0.0079 in 2009 and peaking during the early 2000s. Such variations suggest that Amazon's operational model allows flexibility in leverage over time. However, for the year 2023, the criterion fails to add a point for reduction in leverage.

Current Ratio is growing?

Change in Current Ratio is a measure of a company's ability to pay short-term obligations. It is important for assessing liquidity.

Historical Current Ratio of Amazon.com (AMZN)

The Current Ratio for Amazon (AMZN) has increased from 0.9446 in 2022 to 1.0451 in 2023. This increase of approximately 10.63% is positive from a Piotroski perspective, warranting an addition of 1 point. Historically, Amazon's current ratio has ranged from 0.9446 to 1.5671 over the past 20 years. Comparatively, the industry median was 1.8204 in 2022 but slightly declined to 1.6449 in 2023. While Amazon's ratio is still lower than the industry median, the upward trend is promising and suggests improving liquidity. Hence, the favorable trend implies a good scenario for investors given the incremental rise.

Number of shares not diluted?

Change in shares outstanding refers to the variation in the number of shares issued and actively trading in the market.

Historical outstanding shares of Amazon.com (AMZN)

A review of Amazon's outstanding shares reveals an increase from 10.189 billion in 2022 to 10.304 billion in 2023. This represents an issuance of approximately 115 million additional shares, reflecting a dilution in the ownership stakes of existing shareholders. This increase, a continuance of the trend from previous years, results in a Piotroski score of 0 for this criterion. Over the last two decades, the outstanding shares of Amazon have consistently increased, starting from 8.38704 billion in 2003. This rise can often be seen in companies pursuing aggressive equity financing or reward those in strategic positions with stock options, somewhat reflecting both growth ambitions and potential dilution risks for existing investors.

Operating of Amazon.com (AMZN)

Cross Margin is growing?

Gross Margin represents the percentage of revenues that exceed the cost of goods sold. It is an important indicator of a company's financial health and operational efficiency.

Historical gross margin of Amazon.com (AMZN)

Amazon.com's Gross Margin increased from 0.1316 in 2022 to 0.1632 in 2023, indicating a positive trend. This improvement suggests better cost management or higher revenue achievement relative to the costs. If we're to examine the 20-year trend, Amazon's Gross Margin has experienced significant fluctuations, reaching a peak in 2018 with 0.4025 and a significant dip in 2012 to 0.0677. This variability contrasts with the more stable although slowly declining trend in the industry median Gross Margin, which was 0.8036 in 2003 and reduced to 0.3592 in 2023. The increase in Amazon's Gross Margin in 2023 earns 1 point in the Piotroski Analysis.

Asset Turnover Ratio is growing?

Asset Turnover ratio measures how efficiently a company uses its assets to generate sales. A higher ratio indicates better performance.

Historical asset turnover ratio of Amazon.com (AMZN)

Comparing Amazon’s Asset Turnover of 1.1606 in 2023 with 1.1639 in 2022, it is evident that the Asset Turnover has slightly decreased. Although this might seem negligible, even a minor drop in this ratio suggests a less effective utilization of assets. Long-term data also reveals a general declining trend, from 2.5352 in 2003 to current levels, reflecting changing business dynamics and an increased asset base over the years, especially considering Amazon’s substantial investments in logistics and technology infrastructure.


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