BBY 87.23 (+2.02%)
US0865161014Retail - CyclicalSpecialty Retail

Last update on 2024-06-07

Best Buy (BBY) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Comprehensive analysis of Best Buy's (BBY) Piotroski F-Score for 2023, scoring 4 out of 9. Insights into 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.
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Short Analysis - Piotroski Score: 4

We're running Best Buy (BBY) 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?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

This analysis evaluates Best Buy (BBY) using the Piotroski F-Score, which measures the financial health of a company based on profitability, liquidity, and operating efficiency criteria. BBY's current F-Score is 4 out of 9. Key Findings: 1. Positive Net Income: BBY has positive net income for 2023, maintaining a general trend of profitability. 2. Positive Operating Cash Flow: The company consistently generates more cash from operations than its net income. 3. Declining ROA: BBY's Return on Assets has decreased from 2022 to 2023, indicating less efficiency in using assets to generate earnings. 4. Increasing Financial Leverage: The company's leverage ratio has risen from 2022 to 2023, suggesting higher financial risk. 5. Decreasing Current Ratio: The slight drop in liquidity is concerning, given an already low current ratio. 6. Share Buybacks: Reduction in the number of outstanding shares, representing positive investor sentiment. 7. Declining Gross Margin: A decline from 2022 indicates increased competitive pressures. 8. Decreased Asset Turnover: Reduced efficiency in generating revenue from assets.

Insights for Value Investors Seeking Stable Income

While Best Buy shows strengths in profitability and cash flow generation, there are notable weaknesses. Declining efficiency in asset usage, increased financial risk, and reduced liquidity are areas of concern. Therefore, potential investors should exercise caution. For those interested in Best Buy, further research is advised before making any investment decisions, especially considering competitive pressures and current financial trends. Diversifying investments and monitoring Best Buy's performance closely will be essential to make a well-informed decision.

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

Profitability of Best Buy (BBY)

Company has a positive net income?

Net income is critical to determine as it reflects a company's profitability and sustainability. Positive net income is indicative of a company generating profit, which is a fundamental aspect of long-term viability.

Historical Net Income of Best Buy (BBY)

Best Buy's net income for 2023 stands at $1,419,000,000, marking it as positive. Over the past 20 years, the company had two years of negative net income in 2012 and 2013, but has shown a general capacity for profit generation. The positive net income for 2023 adds 1 point in the Piotroski score, reflecting a healthy profitability trajectory. Despite occasional dips, the general trend is upward, solidifying investor confidence.

Company has a positive cash flow?

Cash Flow from Operations (CFO) represents the amount of cash generated by a company's regular operating activities. It is a crucial indicator of a company's ability to generate sufficient cash to maintain or expand its operations.

Historical Operating Cash Flow of Best Buy (BBY)

For the year 2023, Best Buy (BBY) reported a Cash Flow from Operations of $1,824,000,000. This positive figure indicates that the company is generating sufficient cash from its core operating activities. Historically, over the past 20 years, Best Buy's CFO has fluctuated; however, it has remained positive each year, which is a strong signal of the company's consistent operational efficiency. With positive CFO in 2023, this metric would indeed add 1 point in the Piotroski Score, showcasing a favorable trend in the ability to generate cash through business operations. Therefore, Best Buy earns 1 point under this criterion.

Return on Assets (ROA) are growing?

Change in ROA: This criterion measures the return on assets (ROA) for Best Buy (BBY) from one year to the next. An increase in ROA indicates a more efficient use of the company's assets to generate earnings, which is a positive signal in Piotroski analysis.

Historical change in Return on Assets (ROA) of Best Buy (BBY)

In 2022, Best Buy reported an ROA of 0.1342, while in 2023, the ROA is 0.0852. This change reflects a decrease, not an increase, hence this will impact the Piotroski score negatively. The 20-year historical data shows fluctuating ROA across the years with a high of 0.3541 in 2003 and a decline to 0.0785 in 2023. Compared to the industry median for 2023 (0.3785), Best Buy significantly underperforms. This downward trend suggests that Best Buy has struggled to use its assets effectively to generate earnings over recent years. Thus, the score for this criterion is set to 0.

Operating Cashflow are higher than Netincome?

This criterion evaluates if a company’s operating cash flow exceeds its net income. This measure gauges earnings quality because high operating cash flow relative to net income suggests that the company is effective in generating cash from its operations, thus reflecting its real economic earnings.

Historical accruals of Best Buy (BBY)

For Best Buy (BBY) in 2023, the operating cash flow stood at $1,824 million, while the net income was $1,419 million. Since the operating cash flow surpasses the net income, this gets a point under the Piotroski criterion. This is a favorable trend indicating solid cash generation capabilities. Historically, Best Buy has shown variability in both metrics, with sharp fluctuations observed, such as in 2020 when operating cash flow peaked at $5,535 million, emphasizing resilience. This positive cash flow generation in 2023 strongly reflects the company's robust operational efficiency.

Liquidity of Best Buy (BBY)

Leverage is declining?

Change in Leverage assesses whether the company has reduced its leverage year over year, which is a metric of improved financial health and risk reduction.

Historical leverage of Best Buy (BBY)

The Leverage for Best Buy increased from 0.1872 in 2022 to 0.2103 in 2023, indicating an increase in leverage. Over the last 20 years we have observed fluctuations, with a notable rise starting from 2019 when leverage was 0.1665, until the current 0.2103 leverage in 2023. This indicates that Best Buy's financial leverage has increased, suggesting higher financial risk, and, as such, we assign it 0 points for this criterion.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with short-term assets. A ratio above 1 suggests good liquidity. An increasing ratio indicates improving liquidity, reducing risk for creditors and investors.

Historical Current Ratio of Best Buy (BBY)

With a Current Ratio of 0.9803 in 2023 compared to 0.9874 in 2022, Best Buy’s liquidity has slightly decreased. This marginal decline from an already weak position below 1 is concerning. Over the past 20 years, Best Buy's ratio has been generally lower than the industry median, which was 1.55 in 2023 and has usually remained above 1.4. This highlights an ongoing struggle to maintain adequate liquidity. The result is that the Current Ratio has not increased and the score is 0 for this criterion.

Number of shares not diluted?

Change in shares outstanding indicates whether a company is buying back shares or issuing more. Fewer shares can mean increased value for shareholders.

Historical outstanding shares of Best Buy (BBY)

In 2023, Best Buy's outstanding shares decreased to 224,800,000 from 246,800,000 in 2022. This reduction is generally positive for investors as it suggests share buybacks, potentially improving earnings per share and shareholder value. Historically, the trend supports this positive outlook with continuous reductions from 486,956,522 in 2003 to 224,800,000 in 2023. Therefore, this criterion scores a 1.

Operating of Best Buy (BBY)

Cross Margin is growing?

The change in Gross Margin is an essential criterion for evaluating a company's profitability and operational efficiency.

Historical gross margin of Best Buy (BBY)

In 2023, Best Buy reported a Gross Margin of 0.2141, down from 0.2249 in 2022. This decrease in Gross Margin would result in a score of 0 according to the Piotroski criteria. Over the past 20 years, Best Buy's Gross Margin has experienced fluctuations, generally moving downward from a high of 0.25 in 2003 to the current 0.2141 in 2023. In comparison, the industry median gross margins have been consistently higher, e.g., 0.3785 in 2023. This trend indicates increased competitive pressures and perhaps less pricing power for Best Buy relative to its industry peers.

Asset Turnover Ratio is growing?

Asset Turnover indicates how effectively a company is utilizing its assets to generate revenue.

Historical asset turnover ratio of Best Buy (BBY)

Comparing 2023's Asset Turnover of 2.7801 with 2022's 2.8307 shows a decrease. Historically, Best Buy's Asset Turnover peaked at 3.3047 in 2019 and has averaged around 2.87 over the past 20 years. The 2023 figure, therefore, represents a slight underperformance and results in a loss of 1 point in Piotroski Analysis.


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