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Church & Dwight (CHD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze Church & Dwight's (CHD) financial health for 2023 with a Piotroski F-Score of 7/9, highlighting 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: 7

We're running Church & Dwight (CHD) 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?
1
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?
1
Asset Turnover Ratio is growing?
1

Church & Dwight (CHD) achieved a solid Piotroski F-Score of 7 out of 9, indicating a strong financial position. Here are the key takeaways from the analysis: 1. **Profitability**: CHD has reported a positive net income of $755.6 million in 2023, showing consistency with previous years. Additionally, the Return on Assets (ROA) also saw an increase, highlighting efficient asset use. 2. **Liquidity**: Although CHD's leverage has decreased, showing lower debt levels, the Current Ratio has slightly dropped, reflecting a minor decrease in short-term liquidity. 3. **Operating Efficiency**: CHD's operating cash flow is higher than its net income, which is a good sign of earnings quality. The company also reported an increase in Gross Margin and asset turnover ratio, demonstrating improved operating performance. 4. **Share Dilution**: CHD issued 2 million new shares in 2023, which could dilute share value, so it scored 0 in this category.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 7, Church & Dwight (CHD) appears to be a fundamentally strong company, suggesting good profitability and efficient operations. Despite minor issues in liquidity and share dilution, the overall financial health is positive. It could be worth looking into CHD as a potential investment, especially if you prioritize companies with strong earnings quality and profitability. However, it's essential to consider the implications of the share dilution before making an investment decision.

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

Profitability of Church & Dwight (CHD)

Company has a positive net income?

The criterion checks whether a company's net income in the given year is positive, indicating profitability. A positive net income shows the company is making more money than it spends, which is crucial for long-term viability and shareholder value.

Historical Net Income of Church & Dwight (CHD)

Church & Dwight reported a net income of $755,600,000 in 2023, which is positive. This indicates strong profitability, in line with previous years except for a dip in 2022. For instance, CHD had previously shown a stable increase in profitability, rising from $80,961,000 in 2003 to $785,900,000 in 2020. The positive net income in 2023 continues this long-term trend of fiscal health and is therefore a good indicator. Hence, they achieve the full 1 point on this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is critical as it indicates a company's ability to generate sufficient cash from its core business activities to maintain operations, invest, and meet obligations.

Historical Operating Cash Flow of Church & Dwight (CHD)

For the fiscal year of 2023, Church & Dwight (CHD) reported Cash Flow from Operations amounting to $1,030,600,000. This represents a positive flow of cash, crucial for various business facets including reinvestments and dividends. Observing the historical chart, CFO values have shown consistent growth over the past 20 years, starting from $117,870,000 in 2003. This sustained increase in CFO is a robust indicator of CHD's strong operational performance and effective cash management practices. Conclusively, CHD earns 1 point for this criterion, reflecting positive investor sentiment and financial stability.

Return on Assets (ROA) are growing?

Change in ROA measures a company's ability to generate income as a percentage of its assets, indicating its efficiency.

Historical change in Return on Assets (ROA) of Church & Dwight (CHD)

Church & Dwight's ROA increased from 0.0507 in 2022 to 0.0893 in 2023, adding 1 point to the Piotroski Score. This improvement indicates better asset utilization and efficient operations. Comparatively, the industry median ROA has generally been higher, with an average close to 0.5 over the past 20 years, except a dip to 0.4411 in 2023. The upward trend in CHD's ROA is particularly favorable given that it bucks the industry's recent dip, highlighting the company's improving managerial efficiency and operational effectiveness.

Operating Cashflow are higher than Netincome?

The operating cash flow (OCF) compares the cash generated by the company's regular operating activities against its net income. This criterion is essential as it indicates the quality of the earnings. A higher OCF than net income suggests that the company's earnings are backed by actual cash inflows, reducing the risk of earnings manipulation and ensuring liquidity for ongoing operations.

Historical accruals of Church & Dwight (CHD)

For Church & Dwight (CHD), the operating cash flow for 2023 stands at $1,030.6 million, while net income is $755.6 million. The operating cash flow is higher, resulting in adding 1 point to our score. This trend is favorable, signifying strong earnings quality as the company generates more cash from its core operations than its reported earnings. Over the years, this pattern largely persists, evidencing robust cash generation and efficient operational management, facilitating sustainability and growth. In a 20-year retrospective, OCF has consistently outpaced net income, reflecting enduring operational strength.

Liquidity of Church & Dwight (CHD)

Leverage is declining?

Leverage measures a company's debt levels relative to its equity. Lower leverage generally indicates better financial health.

Historical leverage of Church & Dwight (CHD)

Church & Dwight's leverage increased from 0.257 in 2023, compared to 0.3115 in 2022. This represents a decrease in leverage, which is a favorable trend because it implies the company is depending less on debt to finance its operations, lowering financial risk. Notably, data over the last 20 years show fluctuations, with leverage spiking at 0.4019 in 2004 and bottoming at 0.0848 in 2010. The latest decrease is favorable and suggests cautious debt management amid evolving market dynamics.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover short-term liabilities with short-term assets. A higher ratio indicates better liquidity.

Historical Current Ratio of Church & Dwight (CHD)

For Church & Dwight (CHD), the Current Ratio has decreased from 1.1792 in 2022 to 1.0757 in 2023. This indicates a slight deterioration in the company's ability to cover its short-term liabilities with its current assets. The historical data shows fluctuations over the past 20 years, with 2023 below both the long-term average and the industry median of 1.5029. Therefore, this criterion gets 0 points.

Number of shares not diluted?

Change in shares outstanding is critical for investors because it indicates whether a company is repurchasing shares or issuing new ones.

Historical outstanding shares of Church & Dwight (CHD)

Comparing the outstanding shares of Church & Dwight (CHD) from 2022 and 2023 shows an increase from 242,900,000 to 244,900,000, a rise of 2,000,000 shares. Therefore, by the Piotroski criterion, this would result in 0 points. Over the last 20 years, CHD has had fluctuations in their share count—the count peaked in 2009 at 285,908,000 and has generally trended downward, indicating periods of share buyback activities, although there have also been increases as seen in 2023. Historically, CHD's willingness to repurchase shares is a signal of management's confidence in the company's future, but the increase in shares in 2023 might suggest the issuance of new shares, which could dilute the share value.

Operating of Church & Dwight (CHD)

Cross Margin is growing?

Gross Margin evaluates the core profitability of a company by examining the proportion of revenue that exceeds the cost of goods sold. This metric is vital as it reveals how effectively a company is producing its products and controlling its production costs.

Historical gross margin of Church & Dwight (CHD)

In 2023, Church & Dwight (CHD) reported a Gross Margin of 0.4411, compared to 0.4186 in 2022. This represents an increase from the previous year, which is a positive trend, earning CHD 1 point in the Piotroski Analysis for this criterion. Examining historical data over the past 20 years, CHD has seen fluctuations in its Gross Margin, ranging from a low of 0.3009 in 2003 to a high of 0.4554 in 2016. In comparison to the industry's median gross margin, CHD has generally performed lower but saw improvement when neces- sity arose. The industry's median stood at 0.4411 in 2023, identical to CHD's reported margin. Such alignment indicates CHD's resilience and capability to align itself with industry standards, further emphasizing the positive nature of the 2023 Margin increase.

Asset Turnover Ratio is growing?

The asset turnover ratio measures the efficiency of a company's use of its assets to generate sales or revenue. A higher ratio indicates better performance.

Historical asset turnover ratio of Church & Dwight (CHD)

The asset turnover for Church & Dwight (CHD) has indeed increased from 0.6579 in 2022 to 0.6938 in 2023, thus adding 1 point to its score. This uptick represents an improvement in the company's efficiency in utilizing its assets to generate revenue, which can be seen as a positive indicator. Historically, the asset turnover for CHD has experienced a general downward trend over the last two decades, starting from as high as 1.0028 in 2003 and falling to lows like 0.6848 in 2019. The recent increase breaks this trend of decline and suggests potential operational improvements or better asset management by the company.


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