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AvalonBay Communities (AVB) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

In-depth Piotroski F-Score analysis of AvalonBay Communities (AVB) for 2023, final score: 5/9. A valuable financial insight for investors and analysts.

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 AvalonBay Communities (AVB) 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?
0
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score evaluates a company's financial health based on profitability, liquidity, and operating efficiency criteria. AvalonBay Communities (AVB) has a Piotroski Score of 5 out of 9, which is average and indicates a moderate financial position. Key points include AVB's consistent positive net income and operating cash flow, strong historical profitability, and recent improvement in asset turnover. However, the declining return on assets, increase in leverage, decreasing current ratio, and rising number of outstanding shares are negative factors. This mixed performance suggests both strengths and areas of concern.

Insights for Value Investors Seeking Stable Income

Given AvalonBay Communities' (AVB) balanced Piotroski Score, potential investors should consider both the company's robust profitability and cash flow against its declining liquidity measures and shareholder dilution risks. Further research and comparison with industry peers are advisable. AVB might be worth considering if you prioritize stable, profitable companies, but be cautious of its current financial trends and market conditions.

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

Profitability of AvalonBay Communities (AVB)

Company has a positive net income?

Checking the net income of AvalonBay Communities is crucial, as consistent positive earnings indicate about financial health and profitability.

Historical Net Income of AvalonBay Communities (AVB)

For 2023, AvalonBay Communities (AVB) reported a positive net income of $928,825,000. Over the last 20 years, AVB has consistently reported positive net income, highlighting stability and financial resilience. In 20 years, AVB has never experienced a negative net income, showcasing robust profitability and sound financial management. This solid and sustained profitability is an encouraging indicator for investors, leading to an additional 1 point in the Piotroski Analysis as per the criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a critical measure as it indicates whether a company is generating sufficient cash to sustain operations and grow organically.

Historical Operating Cash Flow of AvalonBay Communities (AVB)

For AvalonBay Communities (AVB) in 2023, the Cash Flow from Operations (CFO) stands at $1,560,029,000, which is positive. This is a positive sign and merits a point in the Piotroski analysis. Historically, AVB's CFO has consistently shown an upward trend over the last 20 years, with values increasing from $239,815,000 in 2003 to $1,560,029,000 in 2023. This strong trajectory suggests that AVB has been effective in generating operational cash flow, contributing positively to its financial stability and capacity for future investments.

Return on Assets (ROA) are growing?

Analyzing ROA involves comparing net income to total assets, indicating how effectively a company utilizes its assets to generate profit.

Historical change in Return on Assets (ROA) of AvalonBay Communities (AVB)

In 2023, AvalonBay Communities (AVB) reported an ROA of 0.0452, declining from 0.0563 in 2022. This decrease signals a less efficient use of assets to generate profits as compared to the previous year. While a decreasing ROA could be a cause for concern, it is crucial to contextualize this within long-term performance trends and industry metrics. Over a 20-year span, AVB’s operating cash flow and the broader industry's median ROA provide useful references. Historical data shows an increase in AvalonBay’s operating cash flow from $239.8 million in 2003 to $1,560 million in 2023, illustrating strong growth. However, the industry’s median ROA has generally ranged higher, indicating that AVB consistently underperforms relative to peers. Therefore, this downward trend in ROA for 2023 is not favorable, and a point would not be added based on Piotroski's scoring criteria.

Operating Cashflow are higher than Netincome?

Comparing Operating Cash Flow and Net Income provides insight into a company's ability to generate cash from its operations, crucial for assessing liquidity.

Historical accruals of AvalonBay Communities (AVB)

For AvalonBay Communities (AVB) in 2023, the Operating Cash Flow stood at $1,560,029,000, while Net Income was $928,825,000, yielding an Operating Cash Flow significantly higher than Net Income. This warrants a score of 1 point based on the Piotroski criteria and underscores a positive trend. The higher Operating Cash Flow compared to Net Income might suggest effective operational performance and sound liquidity. Over the last 20 years, AVB's highest Operating Cash Flow growth was noted from 2022 to 2023, registering an increase from $1,421,932,000 to $1,560,029,000. Conversely, the growth rate for Net Income in the same period dropped from $1,136,775,000 to $928,825,000, marking a decline. Such trends are instrumental for stakeholders evaluating operational efficiency and profitability.

Liquidity of AvalonBay Communities (AVB)

Leverage is declining?

This criterion compares the leverage normally defined as the ratio of total liabilities to total assets, over two time periods.

Historical leverage of AvalonBay Communities (AVB)

AvalonBay Communities (AVB) has witnessed a slight increase in leverage from 0.4144 in 2022 to 0.3934 in 2023. This means the company's debt level relative to its assets has effectively increased, yielding a score of 0 for this criterion. Evaluating the leverage trend over the past 20 years, while fluctuations are noticeable, the broader trend shows generally stable leverage values, except for unforeseen circumstances possibly attributed during the 2008 financial crisis. Monitoring sustained increases may signify potential credit or liquidity issues ahead.

Current Ratio is growing?

Evaluating the Change in Current Ratio for a given company helps to understand shifts in its liquidity position over the years. A higher current ratio signifies a stronger capacity to cover short-term liabilities with short-term assets.

Historical Current Ratio of AvalonBay Communities (AVB)

AvalonBay Communities (AVB) shows a decrease in its Current Ratio from 1.114 in 2022 to 0.7645 in 2023, resulting in a score of 0 for this criterion. Historically, AVB has displayed fluctuations in its liquidity metrics; for instance, it had a ratio of 0.9085 in 2021 but experienced a steep rise to 1.114 in 2022 before dropping again in 2023. Compared to the industry median, AVB's current ratio has trailed in several years, showcasing lower liquidity compared to its peers. The peak in 2012 (6.9859) and the relatively stable trends post that reflect variances as AVB adjusts to market and operational conditions. However, with the recent decline in 2023, caution may be warranted regarded their short-term financial health.

Number of shares not diluted?

Change in Shares Outstanding is critical as it indicates whether the company is issuing new shares, diluting existing shareholders’ value. A decreasing trend is a positive indicator.

Historical outstanding shares of AvalonBay Communities (AVB)

From 2022 to 2023, AvalonBay Communities (AVB) experienced an increase in Outstanding Shares, from 139,634,294 to 141,307,186. This rising trend, opposed to a decreasing one, scores a 0 in the Piotroski F-Score system since it could potentially dilute the existing shareholders' value. Historically examining the data, it's evident the company often issues new shares, as their Outstanding Shares have grown significantly over the last 20 years—from 69,914,477 in 2003 to over 141 million in 2023. This consistent upward trend underscores continued share issuance, which may not always align with existing shareholder interests.

Operating of AvalonBay Communities (AVB)

Cross Margin is growing?

Change in Gross Margin evaluates if a company's profitability per dollar of revenue is improving. An increase signifies better efficiency and financial health.

Historical gross margin of AvalonBay Communities (AVB)

For AvalonBay Communities (AVB), the Gross Margin in 2023 is 0.643, compared to 0.6456 in 2022. This reflects a slight decrease. Therefore, the score for this criterion is 0 points. Over a 20-year span, AVB's Gross Margin has seen variability but generally hovered between 0.6 and 0.66, substantially above the industry median in most years, signifying AVB's historically strong pricing power and cost control. However, the current downward fluctuation warrants cautious monitoring to ensure it doesn’t usher in a prolonged downturn.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in generating sales from its assets.

Historical asset turnover ratio of AvalonBay Communities (AVB)

The Asset Turnover for AvalonBay Communities (AVB) has increased from 0.1285 in 2022 to 0.1346 in 2023. This improvement in Asset Turnover translates into a 1-point addition. Analyzing the 20-year historical data, we observe a generally steady performance with some fluctuations. The recent uptick is a positive indicator of the company's enhanced utilization of its assets to drive revenue. This upward trend highlights AvalonBay's operational efficiency gains, reflecting sound management decisions in asset utilization.


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