DRI 145.65 (+1.66%)
US2371941053RestaurantsRestaurants

Last update on 2024-06-05

Darden Restaurants (DRI) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Darden Restaurants (DRI) achieves a Piotroski F-Score of 7/9 in 2023, highlighting strong financial health and potential for value investors.

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 Darden Restaurants (DRI) 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?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

Darden Restaurants (DRI) scored 7 out of 9 based on the Piotroski F-Score, which is a model assessing a company's financial health using nine criteria related to profitability, liquidity, and operational efficiency. DRI demonstrated strong profitability with positive net income and cash flow, an improved return on assets, and higher operating cash flow than net income. The company also showed positive liquidity signs with decreasing leverage and reducing the number of outstanding shares. However, DRI's current ratio, indicating liquidity, decreased, and its gross margin declined, showing some areas needing improvement. Furthermore, DRI has improved its asset turnover ratio, indicating better use of assets to generate revenue.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 7, Darden Restaurants (DRI) appears to be a solid investment candidate, especially in terms of profitability and operational efficiency. However, potential investors should be cautious about its decreased gross margin and current ratio, which could signal some liquidity and competitive challenges. Further analysis is recommended to understand industry conditions and DRI's strategies to address these issues 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 Darden Restaurants (DRI)

Company has a positive net income?

The criterion checks if the net income for the year is positive, indicating profitability.

Historical Net Income of Darden Restaurants (DRI)

Darden Restaurants (DRI) reported a net income of $981,900,000 in 2023. This is a significantly positive figure, thus earning 1 point in the Piotroski Analysis. Consistently positive net income highlights the company's ability to generate profit over time. For example, comparing it with past performance, the net income figure for 2023 ($981.9 million) is higher than the previous year 2022 ($952.8 million) and significantly better than the net income in 2020 (-$52.4 million), demonstrating a strong recovery and performance trend. Therefore, this is a good indicator for the financial health of Darden Restaurants.

Company has a positive cash flow?

This criterion examines whether Darden Restaurants' (DRI) Cash Flow from Operations (CFO) is positive. A positive CFO indicates healthy operating cash inflows, reflecting the core operational performance of the company.

Historical Operating Cash Flow of Darden Restaurants (DRI)

For 2023, Darden Restaurants (DRI) reported a CFO of $1,545,600,000. This figure is indeed positive, thus earning 1 point according to the Piotroski criteria. Analyzing the historical data, DRI's CFO has predominantly been positive over the last 20 years, showing a commendable upward trend. For example, in 2003, the CFO was $509,292,000, and it has steadily increased over the years except for a few fluctuations, hitting record-high figures in recent years with $1,256,100,000 in 2022 and $1,545,600,000 in 2023. This trend not only adds a point in the Piotroski F-score analysis but also indicates that DRI's core business operations have been consistently generating cash, which bodes well for the company's financial health and long-term sustainability.

Return on Assets (ROA) are growing?

Return on Assets (ROA) evaluates a company's ability to generate profit using its assets. It's a crucial metric to understand operational efficiency.

Historical change in Return on Assets (ROA) of Darden Restaurants (DRI)

In 2022, Darden Restaurants (DRI) had a ROA of 0.0917, which increased to 0.0964 in 2023. This improvement in ROA indicates better utilization of assets to generate profit, thus earning one point in the Piotroski analysis. Compared to the industry median of 0.3206 in 2023, Darden’s ROA is considerably lower, signaling potential room for improvement to reach industry standards.

Operating Cashflow are higher than Netincome?

Operating cash flow being higher than net income is a positive indicator as it suggests that the company is generating sufficient cash from its core operations to support its earnings.

Historical accruals of Darden Restaurants (DRI)

In 2023, Darden Restaurants (DRI) reported operating cash flow of $1,545,600,000 compared to a net income of $981,900,000. This indicates that the company’s core operations are generating substantial cash flow, which exceeds its net income by $563,700,000. Historically, this trend has been consistent, as operating cash flow has generally been strong over the past two decades, indicating robust cash generation capabilities. Overall, this criterion adds 1 point in the Piotroski Analysis, suggesting a positive performance.

Liquidity of Darden Restaurants (DRI)

Leverage is declining?

Change in Leverage represents the shift in a company’s debt levels relative to its equity. It is vital to track because an increase in leverage indicates higher financial risk, while a decrease reveals reduced risk.

Historical leverage of Darden Restaurants (DRI)

Leverage for Darden Restaurants decreased from 0.4622 in 2022 to 0.4489 in 2023. This reduction is favorable and adds 1 point in the Piotroski F-Score. The overall trend in leverage shows variation, particularly a significant increase during 2020. This recent decrease signifies improved balance sheet health after high leverage levels impacted by the pandemic, demonstrating a prudent approach to financial management.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term obligations with its current assets. A higher ratio indicates better liquidity.

Historical Current Ratio of Darden Restaurants (DRI)

Comparing the current ratio of 0.515 in 2023 with 0.6384 in 2022, it showcases a decrease. This signifies a worsening liquidity position for Darden Restaurants. With a drop from 0.6384 to 0.515, it suggests potential challenges in meeting short-term liabilities. The historical analysis reveals that DRI's current ratio has often trailed behind the industry median, jeopardizing its short-term financial health. Therefore, under the Piotroski Analysis, the current ratio does not earn a point this year. Additionally, the company might face constrained liquidity especially when compared to the industry's median current ratio of 0.777 in 2023.

Number of shares not diluted?

Shares Outstanding measures the total number of a company’s shares of stock that are currently owned by investors, including shares held by institutional investors and restricted shares. This criterion is important as it influences earnings per share (EPS) and can signal potential shareholder-friendly moves like stock buybacks.

Historical outstanding shares of Darden Restaurants (DRI)

In comparing the Outstanding Shares of 127,800,000 in 2022 to 121,900,000 in 2023, it is evident that Darden Restaurants has decreased its Outstanding Shares. From the additional 20-year data, it's clear that Darden has generally followed a trend of reducing shares, except for occasional increases. The decrease in Outstanding Shares is a positive sign, suggesting the company could be engaging in share buybacks, thereby potentially increasing EPS and adding value for shareholders. Therefore, Darden Restaurants scores 1 point for this criterion.

Operating of Darden Restaurants (DRI)

Cross Margin is growing?

Change in Gross Margin is the difference in the gross profit as a percentage of total revenue from one year to the next.

Historical gross margin of Darden Restaurants (DRI)

In 2023, Darden Restaurants (DRI) reported a Gross Margin of 0.1986, down from 0.2072 in 2022. This implies a decrease in Gross Margin, earning 0 points. For context, over the past 20 years, DRI's Gross Margin ranged from 0.1804 to 0.2401, placing the 2023 margin on the lower end of its historical range. Moreover, the gross margin is also significantly lower than the 2023 industry median of 0.3206, underscoring a competitive disadvantage.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. It is crucial in analyzing operational performance.

Historical asset turnover ratio of Darden Restaurants (DRI)

The Asset Turnover for Darden Restaurants has increased from 0.9263 in 2022 to 1.0294 in 2023, signifying an improvement in the company's efficiency in utilizing its assets to generate revenue. This uptrend, which scores 1 point in the Piotroski Analysis, suggests a positive development, particularly in contrast to long-term trends where Darden faced variations, notably with a significant drop to 0.6986 in 2021. This increase indicates effective asset utilization as DRI navigates post-pandemic business conditions, showing resilience and strategic operational improvements.


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