DE 373.45 (-1.53%)
US2441991054Farm & Heavy Construction MachineryFarm & Heavy Construction Machinery

Last update on 2024-06-06

Deere (DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Deere (DE) achieves a Piotroski F-Score of 7/9 in 2023, indicating its strong financial position based on 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.
Learn more...

Short Analysis - Piotroski Score: 7

We're running Deere (DE) 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?
0
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

Deere (DE) has been evaluated using the Piotroski F-Score model to analyze its financial health based on profitability, liquidity, and operating efficiency criteria. With a score of 7 out of 9, Deere shows strong financial performance. The company has a positive net income and cash flow from operations, indicating effective profitability and cash generation. Although its leverage has slightly increased and current ratio has decreased, Deere maintains strong liquidity compared to industry standards. Shareholder value is enhanced through reduction in outstanding shares, and improvements in gross margin and asset turnover demonstrate efficient operations.

Insights for Value Investors Seeking Stable Income

Given Deere's solid Piotroski F-Score and notable financial strengths, it appears to be a robust investment option. Investors may consider looking further into Deere (DE) due to its demonstrated profitability, efficient operations, and strategic financial maneuvers enhancing shareholder value. However, attention should be given to recent trends in leverage and current ratio to ensure these do not indicate future risks.

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

Profitability of Deere (DE)

Company has a positive net income?

Net income indicates a company's profitability over a period. Positive net income suggests that the company is making more money than it is spending, which is a sign of financial health.

Historical Net Income of Deere (DE)

Deere (DE) has a net income of $10,166,000,000 for the year 2023, indicating a positive return. Historically, Deere's net income has shown an upward trajectory, particularly noteworthy over the past few years. For example, the net income in 2011 was $2,799,900,000, and it has steadily increased, hitting $7,131,000,000 in 2022 before this year's peak. This consistent growth in net income is a positive signal of the company’s ability to generate profits efficiently. Given this trend, we add 1 point for this criterion in the Piotroski score.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates a company's ability to generate sufficient positive cash flow to maintain operations, growth, and profitability.

Historical Operating Cash Flow of Deere (DE)

For Deere (DE), the Cash Flow from Operations (CFO) in 2023 was $8,589,000,000, which is a positive sign. This gives us a score of 1 point according to the Piotroski criterion. Historical data supports this positive trend as the CFO has consistently been positive over the last 20 years, showing a company that consistently generates enough cash from its core business operations. Both 2020 ($7,483,000,000) and 2021 ($7,726,000,000) also reflect strong performance, further substantiating the upward trajectory culminating in the 2023 high.

Return on Assets (ROA) are growing?

Explain the criterion for Deere (DE) and why it is important to consider

Historical change in Return on Assets (ROA) of Deere (DE)

The change in Return on Assets (ROA) is a critical indicator of a company's profitability and efficiency in using its assets to generate earnings. A rising ROA suggests improved financial performance and effective utilization of assets, which is positive for investor sentiment.

Operating Cashflow are higher than Netincome?

The criterion assesses whether operating cash flow surpasses net income. It ensures cash-based quality in earnings.

Historical accruals of Deere (DE)

For 2023, Deere (DE) recorded an operating cash flow of $8.589 billion, which is lower than its net income of $10.166 billion. Therefore, the criterion receives a score of 0. This trend suggests that Deere's earnings quality has room for improvement, as higher operating cash flow relative to net income generally indicates that the earnings are strongly supported by actual cash generation rather than accruals or non-cash items. Over the past 20 years, although there have been fluctuations, the operating cash flow's alignment with net income has not consistently favored one over the other. In some years, such as 2020, the gap was significantly positive (operating cash flow of $7.483 billion vs. net income of $2.751 billion), which indicates a healthier cash generation relative to reported profits.

Liquidity of Deere (DE)

Leverage is declining?

Leverage is a measure of financial risk and indicates the proportion of debt a company uses to finance its assets. Lower leverage is generally preferred as it represents lower risk.

Historical leverage of Deere (DE)

In 2022, Deere had a leverage ratio of 0.3732, which increased to 0.3697 in 2023. According to the Piotroski score criteria, if leverage decreases over the period, the company is awarded 1 point. However, since leverage has increased marginally, Deere does not meet this criterion and thus is awarded 0 points. It's crucial to observe that, historically, Deere's leverage has fluctuated significantly, reaching its peak in 2015 at 0.4905 and bottoming out in 2016 at 0.0863. The current level is relatively low on a historical basis, but the incremental increase from 2022 to 2023 suggests a slight escalation in debt levels, which isn't considered beneficial from a financial risk perspective.

Current Ratio is growing?

The Current Ratio, which measures a company's ability to cover short-term liabilities with short-term assets, is integral for liquidity assessment.

Historical Current Ratio of Deere (DE)

Deere (DE) saw its Current Ratio decrease from 1.9347 in 2022 to 1.8598 in 2023, signifying a minor reduction in its short-term liquidity. This trend did not qualify for adding a point in the Piotroski Analysis as an increase in the ratio is desired. Historically, Deere's ratios remain mostly above the industry median, demonstrating stronger liquidity than peers, though the recent decline warrants close monitoring to ensure it does not signal future fiscal constraints.

Number of shares not diluted?

Change in shares outstanding is crucial because it can dilute existing shareholders' equity.

Historical outstanding shares of Deere (DE)

In 2022, Deere (DE) had 304,500,000 outstanding shares, which decreased to 292,200,000 in 2023. This reduction in outstanding shares represents a strategic move, possibly indicating share repurchase efforts or other maneuvers aimed at enhancing shareholder value. By decreasing the number of shares, shareholders' equity is less diluted, potentially increasing the value per share. Given this trend, Deere earns 1 point for this criterion. Historically, the outstanding shares have shown a steady decline from 487,196,970 in 2003 to the current 292,200,000, signaling consistent shareholder-friendly activities.

Operating of Deere (DE)

Cross Margin is growing?

Change in Gross Margin measures the difference in a company's Gross Margin ratio year-over-year. It assesses the company’s ability to increase its revenue relative to its cost of goods sold. Higher Gross Margins indicate better efficiency and profitability.

Historical gross margin of Deere (DE)

By comparing the Gross Margin ratios, we find that Deere's Gross Margin has significantly improved from 0.3067 in 2022 to 0.3702 in 2023. This represents an increase of 6.35 percentage points. The company has become more efficient in managing its production costs relative to its revenue generation. Examining the 20-year historical trend, Deere's 2023 Gross Margin of 37.02% is the highest in this period, surpassing the industry median Gross Margin of 25.46% in 2023. Given these figures, Deere earns a point for this Piotroski criterion, signaling strong financial health and operational efficiency compared to its past performance and its industry peers.

Asset Turnover Ratio is growing?

Asset Turnover involves the effectiveness with which a company uses its assets to generate sales. An increasing Asset Turnover ratio signals improved efficiency.

Historical asset turnover ratio of Deere (DE)

The Asset Turnover ratio for Deere (DE) has increased from 0.589 in 2022 to 0.6207 in 2023. This uptick indicates that Deere has been more efficient in utilizing its assets to generate sales. Looking at historical data, this is one of the better performances in the last two decades—with the Asset Turnover often below 0.6 since 2015. This positive trend results in adding 1 point under the Piotroski F-Score criteria, denoting a favorable outlook for Deere's operational efficiency.


Obligatory risk notice

We would like to point out that the contents of this website are for general information purposes only and do not constitute recommendations for the purchase or sale of specific financial instruments, and therefore do not constitute investment advice. In particular, marketstorylabs.com and its creators cannot assess the extent to which information / recommendations made on the pages correspond to your investment objectives, your risk tolerance and your ability to bear losses. Therefore, if you make any investment decisions based on information on the site, you do so solely on your own responsibility and at your own risk. This in turn means that neither marketstorylabs.com nor its creators are liable for any losses incurred as a result of investment decisions based on the information on the marketstorylabs.com website or other media used.