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Last update on 2024-06-06

Alexandria Real Estate Equities (ARE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Piotroski F-Score analyses Alexandria Real Estate Equities (ARE) strengths and weaknesses in 2023. Discover the profitability, liquidity, and operating 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: 5

We're running Alexandria Real Estate Equities (ARE) 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?
0
Current Ratio is growing?
0
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score for Alexandria Real Estate Equities (ARE) is 5 out of 9, based on analyses of their profitability, liquidity, and operating efficiency. Here's a breakdown: 1. Profitability: ARE has positive net income and cash flow from operations, but its Return on Assets (ROA) has declined. 2. Liquidity: The company's leverage has increased, and the current ratio has decreased, indicating potential liquidity issues. Added shares also dilute value for current shareholders. 3. Operating Efficiency: The company's Gross Margin and Asset Turnover Ratio have both improved. In summary, ARE has mixed performance indicators, with strong profitability signals but concerning liquidity metrics.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 5, Alexandria Real Estate Equities shows a moderate financial position. While the company exhibits strong cash flow and operational efficiency, the increasing leverage and decreasing current ratio raise some concerns about liquidity and financial risk. For investors, it may be worth conducting further research or viewing it as a potential, albeit somewhat risky, investment opportunity given the mixed signals. Diversification or caution is recommended when considering 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 Alexandria Real Estate Equities (ARE)

Company has a positive net income?

Net income represents the company's total earnings, and positive net income indicates profitability.

Historical Net Income of Alexandria Real Estate Equities (ARE)

In 2023, Alexandria Real Estate Equities (ARE) reported a net income of $103,639,000, which is positive. Analyzing the last 20 years, ARE has shown a consistent ability to generate positive net income, except for 2016 where the net income was negative ($-66,901,000). This year's positive net income, while significantly lower than previous years such as 2022 and 2021 ($521,660,000 and $571,247,000 respectively), still contributes positively to ARE's financial health. Hence, it adds 1 point to the Piotroski score.

Company has a positive cash flow?

Cash Flow from Operations (CFO) evaluates if the company generates more cash than it spends on its core operations.

Historical Operating Cash Flow of Alexandria Real Estate Equities (ARE)

Alexandria Real Estate Equities (ARE) has reported a positive Cash Flow from Operations (CFO) of $1,630,550,000 in 2023. This indicates a healthy generation of cash from its core business activities, a critical indicator of financial stability and operational efficiency. Not only does the company earn 1 point for having a positive CFO, but the consistent increase over the past 20 years, from $74,847,000 in 2003 to its current value, showcases a robust and improving cash generation capacity. Such a trend is a positive signal to investors concerning the sustainability and growth potential of the company's operations.

Return on Assets (ROA) are growing?

Change in ROA for Alexandria Real Estate Equities (ARE). This criterion assesses whether a company's Return on Assets (ROA) has increased from one fiscal year to the next, signaling improved efficiency in generating profit from its assets.

Historical change in Return on Assets (ROA) of Alexandria Real Estate Equities (ARE)

Unfortunately, the ROA for Alexandria Real Estate Equities (ARE) has shown a significant decline from 0.0159 in 2022 to 0.0029 in 2023. This downward trend indicates reduced profitability relative to the company's asset base. Over the past 20 years, the operating cash flow has generally increased significantly, but the ROA has not mirrored this growth rate. Moreover, the industry median ROA for 2023 was 0.6434, showing a vast gap between ARE's performance and the industry standard. Considering these metrics, it is clear that ARE's current trend in ROA is unfavorable.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a measure of earnings quality.

Historical accruals of Alexandria Real Estate Equities (ARE)

For Alexandria Real Estate Equities (ARE), the Operating Cash Flow in 2023 is $1,630,550,000, significantly higher than its Net Income of $103,639,000. This disparity is intriguing and notably good, signifying that the company generates ample cash through its core operations, implying enhanced earnings quality. Consistently positive operating cash flows across the past 20 years also reinforce this outlook, highlighting a robust operational framework. Hence, for this criterion, ARE meets the positive condition, earning 1 point.

Liquidity of Alexandria Real Estate Equities (ARE)

Leverage is declining?

Evaluation of change in leverage over time for Alexandria Real Estate Equities is crucial as it examines the company's financial structure and risk level by comparing debt to equity ratios.

Historical leverage of Alexandria Real Estate Equities (ARE)

In 2022, the leverage for Alexandria Real Estate Equities (ARE) was 0.2975. However, in 2023, it increased to 0.3154. This uptick in leverage signifies a higher proportion of debt compared to equity. Over a broader perspective spanning two decades, ARE's leverage has shown considerable fluctuation. For instance, it was markedly higher at 0.634 in 2004 and then dropped significantly to as low as 0.0802 in 2014. The recent increase from 0.2975 to 0.3154, although seemingly minor, represents a reversal from the declining trend observed in earlier years. This trend is typically seen as unfavorable, as higher leverage could signal increased financial risk for the company.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. It is important as it provides insights into financial stability.

Historical Current Ratio of Alexandria Real Estate Equities (ARE)

The Current Ratio for Alexandria Real Estate Equities (ARE) decreased in 2023 to 0.3907 from 0.5822 in 2022. This suggests a reduction in liquidity. Given the historical context where ARE’s Current Ratio fluctuated between -0.1866 and 0.7285, and consistently remained below the industry median, the declining trend in 2023 emphasizes potential concerns about short-term financial health. This decrease scores 0 points, indicating a negative turn.

Number of shares not diluted?

Analyze the importance of changes in shares outstanding, focusing specifically on Alexandria Real Estate Equities (ARE).

Historical outstanding shares of Alexandria Real Estate Equities (ARE)

Between 2022 and 2023, Alexandria Real Estate Equities (ARE) saw an increase in outstanding shares from 161,659,000 to 170,909,000. This trend is generally viewed as unfavorable in the Piotroski F-Score because an increasing number of shares dilutes the ownership percentage of existing shareholders, often indicating the company is raising capital possibly to cover deficits or fund new projects. Historical data over the last 20 years shows that ARE's number of outstanding shares has generally been on a steady upward trend, from 19,247,790 in 2003 to the current 170,909,000 in 2023. This consistent increase might be associated with the company's growth strategy, but for the specific year-over-year change considered here, no point is awarded, making the result 0.

Operating of Alexandria Real Estate Equities (ARE)

Cross Margin is growing?

Gross Margin measures the percentage of a company's revenue that exceeds its cost of goods sold. A higher gross margin indicates more efficient production and potentially higher profitability.

Historical gross margin of Alexandria Real Estate Equities (ARE)

The Gross Margin for Alexandria Real Estate Equities has increased from 0.6975 in 2022 to 0.7023 in 2023. This is a positive trend indicating better cost management or improved pricing strategies. Over the past 20 years, the company's gross margin has generally been higher than the industry median, with the margin consistently staying above 0.69 since 2012. This trend is favorable for investors as it signals stronger operational efficiency compared to industry peers. One point can be added based on this criterion as the Gross Margin has increased.

Asset Turnover Ratio is growing?

Asset turnover is a metric that defines how efficiently a company utilizes its assets to generate sales. It's calculated by dividing the company's revenue by its total assets. An increase signifies better efficiency and effective asset utilization.

Historical asset turnover ratio of Alexandria Real Estate Equities (ARE)

For Alexandria Real Estate Equities (ARE), the asset turnover ratio increased from 0.0788 in 2022 to 0.0798 in 2023. This implies a slight improvement in the company's efficiency in generating revenue from its asset base. Although the increase appears minor, it's important as it signifies that the company is incrementally better at utilizing its assets to generate sales. Historical data over the last 20 years show fluctuations, with the highest asset turnover ratio being 0.1103 in 2003 and the lowest at 0.0735 in 2010. Given the upward trend from 2022 to 2023, we award 1 point for this criterion, reflecting positive asset management.


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