Last update on 2024-06-07

Covenant Logistics Group (CVLG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Covenant Logistics Group (CVLG) Piotroski F-Score for 2023: Analyzing profitability, liquidity, and efficiency with a final score of 4/9.

Short Analysis - Piotroski Score: 4

We're running Covenant Logistics Group (CVLG) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a rating system ranging from 0 to 9 that evaluates the financial strength of a company based on profitability, liquidity, and leverage. For Covenant Logistics Group (CVLG), the current score is 4 out of 9. Here's a breakdown: 1. CVLG has a positive net income and cash flow from operations in 2023, contributing positively to their score. 2. However, the Return on Assets (ROA) has dropped, industries norms are not favorable, and leverage has increased, indicating higher financial risk. 3. The company's current ratio and asset turnover ratio have both declined, showing potential liquidity and efficiency issues. 4. The remarkable reduction to zero in outstanding shares is unusual and might need further checking. In essence, CVLG shows mixed signals with solid profitability but struggles in some areas of efficiency and financial risk management.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 4, Covenant Logistics Group shows strengths in profitability with positive income and robust cash flow. Nonetheless, there are concerns about declining returns on assets, increased leverage, reduced current ratio, and a drop in asset turnover ratio. Moreover, the unusual zero outstanding shares should be investigated. Potential investors may consider these mixed signals carefully. Further analysis, especially regarding the drop in ROA and rise in leverage, might be essential before making any investment decisions.

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

Profitability of Covenant Logistics Group (CVLG)

Company has a positive net income?

Net income refers to the company's total earnings or profit. It is calculated by subtracting total expenses from total revenues.

The net income for Covenant Logistics Group in 2023 stands at $55,229,000, which is positive. This is a good trend, as positive net income indicates that the company is profitable. Over the past 20 years, Covenant Logistics Group has had fluctuating net incomes, with both significant gains and losses, including a notable loss of $53,391,000 in 2008. Despite these fluctuations, the recent trend of positive net income suggests a period of financial stability and effective cost management.

Company has a positive cash flow?

One of the fundamental components for assessing a company's financial health is Cash Flow from Operations (CFO). Positive CFO indicates that the company is generating sufficient cash from its core business activities.

For Covenant Logistics Group (CVLG), the CFO for the year 2023 stands at $84,841,000, which is positively significant. The historical data over the past 20 years showcases a trend of progressively increasing CFO, barring some variability. For example, CFO was $25,573,000 in 2005, and $159,230,000 in 2021, reflecting substantial growth over time. Given the positive CFO in 2023, CVLG scores a full point on this Piotroski criterion, reinforcing a solid operating cash flow trajectory.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) assesses a company's efficiency in using its assets to generate profits and is crucial for evaluating management's effectiveness.

For Covenant Logistics Group (CVLG), the ROA dropped from 0.1501 in 2022 to 0.0631 in 2023, a significant decrease which results in scoring 0 points for this criterion. The company has historically had fluctuating ROA values, with a peak of 0.1501 in 2022, substantially higher than the 20-year mean. However, 2023 marks a decline influenced perhaps by externalities or operational inefficiencies. Industry medians have also varied, but CVLG's recent drop positions it unfavorably against industry norms, both in absolute terms and in trajectory. This downturn might necessitate remedial measures to boost asset utilization rates.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income assesses the quality of a firm's earnings by comparing cash generation to accounting profits.

In 2023, Covenant Logistics Group (CVLG) reported an Operating Cash Flow (OCF) of $84,841,000 and a Net Income (NI) of $55,229,000. Since the OCF is indeed higher than the NI, it adds 1 point to the Piotroski score. This trend is good as it indicates that the net income is well-supported by actual cash flow, enhancing the reliability of earnings. Historically, CVLG has shown fluctuations in both metrics, but seeing a higher OCF than NI this year portrays strong cash earnings capability.

Liquidity of Covenant Logistics Group (CVLG)

Leverage is declining?

Change in leverage assesses how a company's debt levels have shifted year-over-year, indicating changes in financial risk.

In 2022, Covenant Logistics Group (CVLG) had a leverage of 0.1723, which increased to 0.2442 in 2023. This rise, amounting to a 41.7% increase, suggests that CVLG has taken on additional debt relative to its equity. Historically, CVLG has experienced fluctuations in leverage, peaking at 0.3029 in 2019 and hitting a low of 0.0704 in 2021. The increase in 2023 could signify an elevation in financial risk if this debt is not managed prudently to generate returns. Therefore, under the Piotroski F-Score, CVLG scores 0 points for this criterion.

Current Ratio is growing?

A metric that shows the company’s ability to cover short-term liabilities with short-term assets. Increasing is favorable.

Covenant Logistics Group's Current Ratio decreased from 1.4262 in 2022 to 1.0919 in 2023. This is a negative change, thus we add 0 points. A higher ratio indicates better liquidity, but CVLG's current year ratio is slightly fretting when pitted against its previous year and the industry median of 1.3866 which is higher than its current ratio.

Number of shares not diluted?

Change in Shares Outstanding measures whether a company is diluting its stock or enhancing value for current shareholders; a decrease is favorable.

The Outstanding Shares for Covenant Logistics Group (CVLG) have zero value in 2023 compared to 15,006,000 shares in 2022, showing a 100% decrease. Over the past 20 years, shares have fluctuated between 14,109,000 and 18,469,000, suggesting various issuance events. Ideally, a decrease in outstanding shares, a sign of potential repurchases, is favorable as it implies enhancing existing shareholder value by reducing supply. However, the zero-value is suspicious and atypical and may require verification for potential errors or data adjustments. Given this 100% decrease, theoretically, it would improve Piotroski's score by 1 point, but the peculiar zero value warrants caution.

Operating of Covenant Logistics Group (CVLG)

Cross Margin is growing?

The change in gross margin assesses a company's production efficiency and cost management.

The gross margin for Covenant Logistics Group (CVLG) has decreased slightly from 0.1528 in 2022 to 0.1488 in 2023. As a result, this indicates a reduction in CVLG's efficiency in converting revenue into actual profit less the cost of goods sold. Considering the data over the last 20 years, there have been fluctuations, but a clear downward trend can be noted post-2009. The industry median gross margin for 2023 also stands at 0.1488, indicating that CVLG's performance is on par with the industry norm. Given this decrease, we would score this criterion with 0 points as the margin has not improved.

Asset Turnover Ratio is growing?

The criterion evaluates whether the company's efficiency in using assets to generate revenue has improved.

The Asset Turnover decreased from 1.6804 in 2022 to 1.2604 in 2023. Asset Turnover Ratio reflects how efficiently a company uses its assets to generate sales. A lower ratio in 2023 compared to 2022 indicates a decline in efficiency, signaling potential operational challenges or lower demand. Over the last 20 years, this ratio has seen fluctuations with a peak in 2022 (1.6804) and a low in 2016 (1.0584). The 2023 decline to 1.2604 denotes a reversal of prior year improvements, warranting careful scrutiny. This trend is unfavorable, thus 0 points are added.