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Last update on 2024-06-05

Franklin Resources (BEN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Comprehensive analysis of Franklin Resources (BEN) using the Piotroski F-Score model for 2023, highlighting profitability, liquidity, and leverage insights. Final Score: 4/9.

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 Franklin Resources (BEN) 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?
1
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

The Piotroski F-Score is used to assess the financial health of Franklin Resources (BEN). It ranges from 0 to 9, and BEN scored a 4 based on its 2023 financials. The criteria covered profitability, liquidity, and operating efficiency. Profitability: BEN has a positive net income ($882,800,000) and positive operating cash flow ($1,138,700,000), earning 1 point each. However, its Return on Assets (ROA) decreased, scoring 0 points. Moreover, efficiently generating cash (OCF > Net Income) added another point. Liquidity: The company's leverage increased, giving it 0 points, but its current ratio improved significantly (from 3.6959 in 2022 to 4.1278 in 2023), earning 1 point. Operating Efficiency: The number of shares increased from 488,700,000 to 490,000,000, scoring 0 points. BEN’s gross margin declined (0.6266 to 0.5549), and its asset turnover also decreased, contributing no points.

Insights for Value Investors Seeking Stable Income

Based on a Piotroski F-Score of 4 and the analysis of Franklin Resources (BEN), investors should be cautious. While the company shows strength in liquidity and operating cash flow, declining margins, efficiency, and rising leverage present concerns. It may be worth investigating further or considering diversification if one already holds positions in BEN.

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

Profitability of Franklin Resources (BEN)

Company has a positive net income?

This criterion checks if Franklin Resources (BEN) earned a positive net income in 2023. A positive net income indicates the company is profitable.

Historical Net Income of Franklin Resources (BEN)

Franklin Resources (BEN) reported a net income of $882,800,000 in 2023, which is positive. This not only reflects profitability but also aligns with historical trends, showcasing a consistent ability to generate profit, albeit with some fluctuations. In the past two decades, the lowest net income was $502,830,000 in 2003, whereas the highest was $2,384,300,000 in 2014. The positive income of 2023, though lower than the past few years, still signals overall financial health. Thus, BEN earns 1 point for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash a company generates from its regular operating activities. It is crucial as it indicates a firm’s ability to generate cash from its core business, which is a key aspect of financial stability.

Historical Operating Cash Flow of Franklin Resources (BEN)

Franklin Resources (BEN) reported a cash flow from operations (CFO) of $1,138,700,000 in 2023, which is positive. This is a favorable indicator for the company, showing that it can generate cash from its core operating activities. Over the past 20 years, the company's operating cash flow has generally been positive, with a noticeable dip to $268,500,000 in 2019. Historically, higher values such as $2,039,700,000 in 2013 show strong operational performance, reinforcing the current positive CFO trend.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) is crucial for evaluating a company's efficiency in generating profits relative to its total assets from one year to another.

Historical change in Return on Assets (ROA) of Franklin Resources (BEN)

Franklin Resources (BEN) has seen a decline in ROA from 0.0495 in 2022 to 0.0303 in 2023. This reduction results in a score of 0 for this criterion. A decreasing ROA is unfavorable as it indicates that the company is generating less profit from its assets compared to the previous year. When compared to the industry median ROA, which was generally much higher throughout the years, BEN needs to address this downward trend to remain competitive and financially healthy.

Operating Cashflow are higher than Netincome?

Operating Cash Flow (OCF) being higher than Net Income signifies efficient earnings quality and management efficiency. It indicates that the company generates ample cash from operations, which is crucial for meeting short-term liabilities, funding operations, and making investments without relying on external financing.

Historical accruals of Franklin Resources (BEN)

In 2023, Franklin Resources (BEN) reported an Operating Cash Flow of $1,138,700,000 compared to a Net Income of $882,800,000. The OCF is significantly higher than the net income, indicating that the company has strong cash-generating ability from its core operations. This trend is positive, reflecting BEN's efficient management and strong liquidity position. Historically, the company has consistently maintained a higher Operating Cash Flow relative to Net Income in most years, except for occasional fluctuations, underscoring a robust cash flow management strategy. Consequently, BEN earns 1 point for this criterion in the Piotroski Score evaluation.

Liquidity of Franklin Resources (BEN)

Leverage is declining?

Change in leverage assesses if the company's financial risk is increasing or decreasing, impacting its stability.

Historical leverage of Franklin Resources (BEN)

The leverage ratio for Franklin Resources (BEN) has increased from 0.3337 in 2022 to 0.3902 in 2023. This upward trend indicates that the company is taking on more debt relative to its equity, which could signal a higher financial risk. Over the past 20 years, leverage has generally been low, with significant increases seen only in recent years. The rising leverage in 2023, followed by an increase in 2022, positions the company into a higher risk category, reflecting more financing through debt rather than equity. This trend could concern investors as rising leverage often correlates with increased financial vulnerability.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year. It indicates the efficiency of a company's operating cycle or its ability to turn its product into cash.

Historical Current Ratio of Franklin Resources (BEN)

The current ratio for Franklin Resources (BEN) has increased from 3.6959 in 2022 to 4.1278 in 2023, indicating an improved ability to cover short-term liabilities with short-term assets. This change denotes increased financial health and operational efficiency, which earns the company 1 point in the Piotroski analysis. Analyzing the historical data, the current ratio has generally remained above both its industry median and critical values, often exceeding the standard benchmarks and thus highlighting robust liquidity. Historically, with figures like 5.2871 in 2004 and a peak of 28.8877 in 2013, it is evident that BEN consistently maintains strong liquidity.

Number of shares not diluted?

Change in Shares Outstanding shows whether a company is issuing new shares or buying back its existing shares.

Historical outstanding shares of Franklin Resources (BEN)

In the given case, the outstanding shares for Franklin Resources (BEN) increased from 488,700,000 in 2022 to 490,000,000 in 2023. This indicates that the company has issued more shares rather than repurchasing them. Historically, the number of shares outstanding has decreased significantly from 765,730,964 in 2003 to 490,000,000 in 2023, which is generally a positive sign as it indicates share buybacks. However, the recent increase in shares from 2022 to 2023 is contrary to this long-term trend and could be a sign of capital raising or stock-based compensation. Due to the increase in shares, no point is awarded in this criterion.

Operating of Franklin Resources (BEN)

Cross Margin is growing?

Gross Margin indicates the percentage of revenue that exceeds the cost of goods sold. It's a crucial measure of profitability and cost-efficiency.

Historical gross margin of Franklin Resources (BEN)

Franklin Resources (BEN) exhibited a decline in Gross Margin from 0.6266 in 2022 to 0.5549 in 2023. This is concerning as it reflects a decrease in profitability. Relative to the industry median, which was reported as 0.5982 in 2022, BEN's Gross Margin for 2023 is lower as well. Historically, BEN's Gross Margin has fluctuated but stayed competitive within its industry. Still, the downward trend shown in the last couple of years is critical for investors to monitor closely.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets in generating sales revenue and is crucial for understanding overall operational performance.

Historical asset turnover ratio of Franklin Resources (BEN)

Franklin Resources' Asset Turnover decreased from 0.3169 in 2022 to 0.2698 in 2023. This represents a decline, indicating a less efficient utilization of assets to generate revenue in 2023. Historically, since 2003, the Asset Turnover ratio peaked in 2007 at 0.6384 but has exhibited a general downtrend, particularly after 2008 where the ratio has been below 0.5 except briefly in 2010 and 2011. In the context of Piotroski analysis, this criteria would score 0 points for 2023, suggesting a negative trend this year.


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