Last update on 2024-06-07

Draegerwerk (DRW3.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Analyzing Draegerwerk's Piotroski F-Score for 2023, focused on profitability, liquidity, and efficiency. Final Score: 8/9.

Short Analysis - Piotroski Score: 8

We're running Draegerwerk (DRW3.DE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Draegerwerk received a Piotroski F-Score of 8 out of 9, indicating strong financial health. The analysis covered key aspects including profitability (positive net income, positive cash flow, and improving ROA), liquidity (higher current ratio, no dilution of shares), and operational efficiency (improving gross margin and asset turnover). However, the leverage slightly increased, which is a minor concern.

Insights for Value Investors Seeking Stable Income

With an 8/9 Piotroski score, Draegerwerk appears to be a strong investment opportunity. The company showcases significant strengths in profitability, liquidity, and operational efficiency. The only minor drawback is the increased leverage. Potential investors might consider this stock, keeping an eye on future leverage levels and market conditions.

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

Profitability of Draegerwerk (DRW3.DE)

Company has a positive net income?

Evaluation of net income involves checking profitability. A positive net income results in additional points under Piotroski's score.

For the fiscal year 2023, Draegerwerk recorded a net income of €110,433,000, which is positive. Over the last 20 years, Draegerwerk's net income has fluctuated, but recording €110,433,000 after a negative net income in 2022 confirms a strong recovery. Therefore, Draegerwerk earns 1 point for positive net income according to the Piotroski Score.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is important as it shows the cash a company generates from its regular business operations. A positive CFO indicates that a company can generate enough cash to sustain and grow without relying on external financing.

For Draegerwerk (DRW3.DE), the CFO in 2023 was €189,677,000. This is positive and aligns with a general trend of predominantly positive cash flows over the last two decades, save for the anomaly in 2022 with a CFO of €-144,228,000. Hence, for the criteria of CFO in the Piotroski Analysis, Draegerwerk earns 1 point for 2023. This positive CFO suggests that the company generated sufficient cash from its regular business operations, which is a good indicator of operational efficiency and financial health.

Return on Assets (ROA) are growing?

ROA, or Return on Assets, is a crucial financial metric that measures the profitability relative to the company’s total assets. It indicates how efficiently a company is using its assets to generate earnings.

Draegerwerk's ROA improved from -0.0205 in 2022 to 0.0356 in 2023, which signifies an increase in profitability and efficiency in using assets. This is a promising trend as it reflects a turnaround from negative to positive profitability within a year, likely resulting in a point according to Piotroski criteria. Comparing this to the last 20 years of operating cash flow, significant fluctuations are visible, but the recent change in ROA is a positive sign. For context, the industry median ROA has hovered around 0.5 to 0.65 for the past years, markedly higher than Draeger's figures, which highlight that while Draegerwerk is improving, there is considerable room for growth to match industry norms.

Operating Cashflow are higher than Netincome?

The criterion assesses whether the operating cash flow exceeds net income. Operating cash flow is the actual cash generated by business operations, while net income includes non-cash items. A higher operating cash flow indicates better operational efficiency and cash generation.

In 2023, Draegerwerk's operating cash flow was €189.68 million, which is higher than the net income of €110.43 million. This indicates strong operational cash generation relative to accounting profits. Historically, Draegerwerk has shown variability in operating cash flow, from a high of €459.98 million in 2020 to a low of -€144.23 million in 2022. With a 2023 figure surpassing net income, this reflects positively on operational efficiency. Previous years' trends show inconsistent efficiency; nonetheless, the 2023 numbers are a positive signal, adding 1 point to the score.

Liquidity of Draegerwerk (DRW3.DE)

Leverage is declining?

Change in leverage is crucial as it indicates the company's debt levels. Reduced leverage signals lower financial risk and healthier balance sheet.

For Draegerwerk (DRW3.DE), leverage has increased from 0.078 in 2022 to 0.1097 in 2023, indicating an uptick in debt levels. This is not favorable, suggesting elevated financial risk and potential pressure on Draegerwerk's financial health. Over the last 20 years, there's been variability, with notable low leverage periods in the mid-2010s. This rising trend to 0.1097 in recent times draws attention to possibly growing reliance on debt financing. Thus, this criterion scores 0 as the leverage has increased.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. A higher ratio suggests better liquidity and financial health.

In 2023, Draegerwerk achieved a Current Ratio of 1.8277, up from 1.5614 in 2022. This increase signifies improved liquidity and the company's enhanced ability to manage short-term obligations. Compared to the 20-year historical trend, where Draegerwerk's ratio fluctuated between a low of 1.5614 and a high of 2.1304, the 2023 ratio portrays a recovery from the previous year's dip. Interestingly, while the company's Current Ratio stayed below the industry median since 2003, the 2023 increase marks a positive trend but still falls short of the industry's 4.0615. This signifies an area for potential improvement, but the upward trajectory is a promising sign for stakeholders, warranting a score of 1.

Number of shares not diluted?

The Change in Shares Outstanding criterion gauges whether the company is diluting its shares or not. This is important as dilution can erode shareholder value. By reducing or maintaining the number of outstanding shares, a company shows commitment to enhancing or preserving shareholder value.

For Draegerwerk (DRW3.DE), the number of outstanding shares remained constant at 18,760,000 in both 2022 and 2023. This indicates no dilution over this period, thereby earning no extra point under this specific Piotroski criterion. Looking at the last 20 years, the pattern of share issuance has been relatively stable since 2017, with a significant increment occurring in the years prior. For example, from 2009 to 2010, the shares outstanding increased from 13,075,439 to 14,657,189. This consistency in recent years can be a positive sign for long-term shareholders who are wary of share dilution.

Operating of Draegerwerk (DRW3.DE)

Cross Margin is growing?

Gross margin assesses a company's financial health by calculating the difference between revenue and the cost of goods sold as a percentage of revenue. It indicates the efficiency with which a company uses its resources to produce goods or services.

In 2023, Draegerwerk's Gross Margin stands at 0.4327 compared to 0.4067 in 2022, reflecting an increase. This adds 1 point in the Piotroski analysis, signaling improved efficiency. Despite this rise, Draegerwerk's Gross Margin remains significantly below the industry median of 0.6463 in 2023, indicating room for further improvement. Over a 20-year span, Draegerwerk’s Gross Margin fluctuated, peaking at 0.4917 in 2012, while the industry median consistently stayed higher, highlighting competitive pressure.

Asset Turnover Ratio is growing?

Asset turnover measures the efficiency of a company's use of its assets in generating sales revenue. It is important because it indicates how well the company is utilizing its assets.

Draegerwerk (DRW3.DE) has shown an improvement in its asset turnover ratio, from 0.9691 in 2022 to 1.088 in 2023. This reflects a positive trend, suggesting that the company has become more efficient in generating sales from its asset base. Over the past 20 years, Draegerwerk’s asset turnover ratio varied, with a notable decline in 2022, but recovering significantly in 2023. The increase from 0.9691 to 1.088 in 2023 results in adding 1 point under the Piotroski analysis criterion for asset turnover efficiency. This positive movement could be attributed to effective management strategies or increased demand for Draegerwerk’s offerings.