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Last update on 2024-06-07

AXT (AXTI) - Piotroski F-Score Analysis for Year 2023 (Final Score: 2/9)

AXT Inc. (AXTI) scored 2/9 in Piotroski F-Score for 2023, indicating areas of profitability and liquidity issues.

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: 2

We're running AXT (AXTI) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
0
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?
0
Asset Turnover Ratio is growing?
0

The Piotroski F-Score evaluates a company's financial strength on a scale from 0 to 9, focusing on three categories: profitability, liquidity, and operating efficiency. For AXT (AXTI), the score is only 2 out of 9, suggesting significant financial challenges. Here's the breakdown: - Profitability shows inconsistency, with a negative net income of -$17.88M in 2023, although operating cash flow is positive ($3.4M). - Liquidity is declining, with increasing leverage and a decreasing current ratio. - Operating efficiency is waning, with lower gross margins and asset turnover ratios. Overall, AXT faces financial instability, high debt reliance, and operational inefficiencies.

Insights for Value Investors Seeking Stable Income

Given AXT's low Piotroski F-Score of 2, it may not be an ideal stock for conservative investors seeking financial stability. The company shows volatility in profitability and increasing financial risk due to higher leverage and declining liquidity. Potential investors might want to approach with caution and look for more stable opportunities unless there's a clear path to financial and operational improvement for AXT.

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

Profitability of AXT (AXTI)

Company has a positive net income?

Net income measures profitability, the key measure of a company’s financial performance.

Historical Net Income of AXT (AXTI)

AXT (AXTI) reported a net income of -$17,881,000 in 2023, indicating a negative trend. Over the past 20 years, their net income has been inconsistent, with intermittent years of positive income such as in 2011 ($20,320,000) and 2021 ($15,811,000). Despite some profitable years, the overall inconsistency and recent negative figure signal instability in their profitability. Thus, no point is awarded for net income in the Piotroski score based on this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO): Determines a company's ability to generate cash from its regular operating activities. Positive CFO is a positive indicator.

Historical Operating Cash Flow of AXT (AXTI)

In 2023, AXT (AXTI) generated a positive cash flow from operations (CFO) amounting to $3,403,000. This suggests a favorable trend as positive CFO indicates that the company is able to generate cash from its core business operations, reflecting operational efficiency and stability. Over the past 20 years, the company's CFO has experienced fluctuations, with several negative values during certain periods, such as in 2004 (-$340,000), 2005 (-$7,746,000), and 2021 (-$3,305,000). However, the positive trend in 2023, along with several other positive years, indicates resilience and potential for future stability. Thus, for this criterion, the company earns 1 point, confirming a positive financial health in terms of cash generation.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA): Reflects the efficacy of a company's management in generating earnings from assets. Essential for evaluating trend in financial performance.

Historical change in Return on Assets (ROA) of AXT (AXTI)

The ROA for AXT in 2023 is -0.0491, down from 0.045 in 2022. This marks a significant decline, signaling less efficient asset use to generate profit. The company's operating cash flow also demonstrates inconsistency, swinging from positive to negative over the decade. Additionally, the industry median ROA shows a consistently high trend (e.g., >= 0.37 for the previous two decades), far surpassing AXT's ROA. Thus, AXT does not earn a point here; score is 0 for this criterion.

Operating Cashflow are higher than Netincome?

This criterion assesses the quality of earnings. A higher operating cash flow compared to net income indicates that the company is generating sufficient cash to support its income figures, suggesting stronger financial health.

Historical accruals of AXT (AXTI)

In 2023, AXT's operating cash flow is $3,403,000, significantly higher than its net income of -$17,881,000. This results in a Point for this criterion. Assessing the last 20 years, we see fluctuations in both operating cash flow and net income. Notably, operating cash flow has generally been positive in more years compared to net income, which showcases several years of negative figures. The consistency in generating cash flow, as opposed to swings in net income, indicates that AXT's earnings are likely supported by strong cash fundamentals. In conclusion, 2023's positive operating cash flow relative to the net income, in the context of its historical data, is a strong positive indicator.

Liquidity of AXT (AXTI)

Leverage is declining?

The change in leverage is an important indicator of a company’s financial stability and risk. Lower leverage indicates less dependency on debt.

Historical leverage of AXT (AXTI)

In 2023, AXT Inc. (AXTI) experienced an increase in leverage, moving from 0.0036 in 2022 to 0.0066. This trend is concerning as it signifies greater reliance on debt financing, which could potentially increase financial risk. Historically, the company's leverage has seen significant fluctuations, notably peaking in 2005 at 0.0992 and dropping to 0 between 2010 and 2016. The recent uptick is minor compared to past highs but suggests a shift towards higher debt usage. Therefore, this criterion results in a score of 0 because the leverage has increased.

Current Ratio is growing?

Change in Current Ratio measures a company's ability to pay short-term liabilities with short-term assets, reflecting its financial stability.

Historical Current Ratio of AXT (AXTI)

Comparing the Current Ratio of AXT (AXTI) in 2023 (2.0925) with its ratio in 2022 (2.4367), it is clear that the Current Ratio has decreased. Thus, for this criterion, AXT (AXTI) does not gain a point and is assigned 0 points. Over the past 20 years, AXT's Current Ratio has steadily decreased from a peak of 9.5625 in 2006 to the current level in 2023, revealing a concerning long-term trend of declining liquidity. Also, when contrasted with the industry median Current Ratio data, AXT's ratios fell below the industry average starting from 2019 onwards, signaling that the company's short-term financial health might be weaker compared to its peers.

Number of shares not diluted?

Change in shares outstanding measures if a company is issuing new shares or buying back shares. It's important because issuing new shares can dilute existing shareholders' value, while buying back shares can increase shareholder value.

Historical outstanding shares of AXT (AXTI)

Based on the data provided, it's evident that the number of outstanding shares for AXT has steadily increased over the last two decades, starting from 22,781,000 in 2003 to 42,643,000 in 2023. The consistent rise reflects the company's ongoing strategies possibly aimed at raising further capital for expansion and operations. By 2023, the increase of 539,000 shares from 2022 further continues this historical trend. Despite its potential capital benefits, this increase may dilute shareholder value, thus not earning a point for this Piotroski criterion.

Operating of AXT (AXTI)

Cross Margin is growing?

Change in Gross Margin: Compare the Gross Margin of 0.1757 in 2023 with the Gross Margin of 0.3693 in 2022 and check if Gross Margin increased or decreased. If the Gross Margin increased in 2023 add 1 point if not set it to 0.

Historical gross margin of AXT (AXTI)

In 2023, AXT, Inc. (AXTI) reported a Gross Margin of 0.1757, which represents a significant decline from its Gross Margin of 0.3693 in 2022. This indicates that the company's profitability from its core activities has deteriorated over the past year. Therefore, for the Piotroski criterion concerning the change in Gross Margin, we have to set it to 0. A deeper look into the 20-year historical data reveals that AXT's gross margin trends have experienced substantial fluctuations. For example, in 2003, the gross margin was particularly low at 0.0644, but had highly improved to 0.4301 by 2011, showing substantial variability in performance. Additionally, comparing AXT's gross margins to the industry median over the past 20 years shows that AXT's gross margin has often been below the industry median. In 2011, though both AXT and the industry median gross margins were at 0.4301, AXT’s gross margin has sporadically fluctuated ever since, significantly under-performing the industry median in recent years. For 2023, the industry's median gross margin stands at 0.4718 compared to AXT's 0.1757, marking a stark contrast and suggesting that AXT is facing challenges that are not broadly affecting its industry peers. Thus, based on the provided numbers, the trend is decidedly bad, and this criterion scores a 0 for the Piotroski analysis. The significant decline not only implies reduced cost management efficiency but could also suggest broader operational and market challenges. This result underscores the need for investors to closely monitor AXT’s strategic initiatives aimed at improving profitability moving forward.

Asset Turnover Ratio is growing?

Asset Turnover

Historical asset turnover ratio of AXT (AXTI)

The Asset Turnover ratio measures the efficiency of a company's use of its assets to generate sales or revenue. A declining Asset Turnover ratio, from 0.4018 in 2022 to 0.208 in 2023, indicates reduced efficiency. Despite previous years showcasing highs like 0.7695 in 2010, this current drop suggests the company might not be using its assets as effectively as before, thus no point is added.


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