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Last update on 2024-06-06

Consolidated Edison (ED) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Consolidated Edison (ED) Piotroski F-Score Analysis for 2023 reveals a score of 5/9, indicating moderate financial health based on valuation and profitability.

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: 5

We're running Consolidated Edison (ED) 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?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

We analyzed Consolidated Edison (ED) using the Piotroski F-Score system, which scores out of 9. ED scored a 5, signaling a moderate financial health. Highlights include: a high net income of $2.519 billion and positive cash flow of $2.156 billion, indicating strong profitability. ROA increased by 48.2% from last year, although still below industry standards. OCF was lower than net income this year, missing a key profitability marker. Increased leverage and reduced current ratio show potential liquidity risks, yet ED has better short-term financial health compared to industry. Shares have decreased, enhancing shareholder value. Gross margin grew, but asset turnover decreased, indicating lower efficiency. Overall, ED presents a mixed financial situation, with both strengths and areas for improvement.

Insights for Value Investors Seeking Stable Income

ED achieving a score of 5 on the Piotroski scale suggests average financial health with some strengths but also notable weaknesses. It's a sign to proceed with caution. The company shows strong profitability and better liquidity compared to the industry, yet increasing debt and lower asset turnover pose risks. For potential investors, it might be worth further investigation into its strengths while closely examining debt management and efficiency in resource use. If risk-averse, diversification might be a safer bet; otherwise, exploring more about ED's profitability trends could be beneficial.

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

Profitability of Consolidated Edison (ED)

Company has a positive net income?

Net income determines a company's profitability after accounting for all expenses. Positive net income indicates profitability and operational health.

Historical Net Income of Consolidated Edison (ED)

The net income for Consolidated Edison (ED) in 2023 is $2.519 billion, which is a positive value. This is significant because it highlights the company's strong financial health and profitability. Comparing this to the last 20 years, the 2023 net income is the highest, surpassing even the $1.66 billion in 2022. This upward trend reflects effective management and business strategies, suggesting a robust capability to generate profits. Therefore, Consolidated Edison earns 1 point for this criterion.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) indicates the amount of cash a company generates from its regular operating activities. This metric is crucial as it shows the firm's ability to generate sufficient cash flow to maintain and grow its operations.

Historical Operating Cash Flow of Consolidated Edison (ED)

For the fiscal year 2023, Consolidated Edison (ED) reported a Cash Flow from Operations (CFO) of $2.156 billion. This cash flow is positive, which is a positive indicator and hence adds one point according to the Piotroski Analysis criteria. Over the last 20 years, Consolidated Edison’s CFO has shown substantial fluctuations, peaking at $3.935 billion in 2022 and dropping to its lowest at $629 million in 2008. The reported figure of $2.156 billion for 2023 represents a decrease from the previous year but remains solidly positive, suggesting that the company’s operations continue to generate adequate cash flow. Therefore, according to this criterion, the trend is positive for Consolidated Edison.

Return on Assets (ROA) are growing?

Change in ROA is a criterion used in the Piotroski F-Score to evaluate the most recent return on assets (ROA) relative to the prior year's ROA. ROA is an indicator of how profitable a company is relative to its total assets. An increasing ROA suggests improving profitability and efficient use of assets, which is a positive signal for investors.

Historical change in Return on Assets (ROA) of Consolidated Edison (ED)

The ROA of Consolidated Edison (ED) increased from 0.0251 in 2022 to 0.0372 in 2023. This 48.2% increase is a positive indicator of the company's performance and results in a score of 1 point under the Piotroski F-Score for this criterion. This increase suggests that Consolidated Edison has become more effective in generating profit from its assets over the past year. However, when compared to the industry median ROA, which ranges between 0.3499 and 0.5583 over the past 20 years, Consolidated Edison's ROA is considerably lower. This indicates that while there is an improvement on an individual basis, the company still lags behind the industry's profitability efficiency. This industry context is crucial for investors evaluating ED's financial health relative to its peers.

Operating Cashflow are higher than Netincome?

Analyzing Operating Cash Flow (OCF) compared to Net Income is important because it indicates the quality of earnings. If OCF is consistently higher than Net Income, it suggests that the company is generating sufficient cash from its operations.

Historical accruals of Consolidated Edison (ED)

For Consolidated Edison (ED) in 2023, the Operating Cash Flow (OCF) was $2,156 million compared to a Net Income of $2,519 million. This results in an OCF lower than the Net Income, thus failing this criterion. Over the last 20 years, Consolidated Edison's OCF has fluctuated but has generally shown growth. In cases where accruals, such as in 2023 (0.0325), are relatively low, it can indicate less earnings manipulation. Despite this year's negative outcome, the 20-year trend shows that significant OCF improvements are possible.

Liquidity of Consolidated Edison (ED)

Leverage is declining?

Leverage, often measured as the Debt-to-Equity ratio, refers to how much a company relies on debt to finance its operations. It's important as higher leverage can increase financial risk.

Historical leverage of Consolidated Edison (ED)

The Leverage for Consolidated Edison (ED) has increased from 0.2986 in 2022 to 0.337 in 2023. This trend suggests that the company is relying more heavily on debt to finance its operations, which could introduce higher financial risk. Over the last 20 years, the leverage has shown fluctuations, with significant peaks in years like 2021 (0.3695) and drops in years such as 2012 (0.2442). The current leverage is relatively moderate compared to some earlier peaks, but the upward trend noted in 2023 compared to 2022 indicates increased financial risk. Hence, ED would score 0 points for this criterion in Piotroski Analysis.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets.

Historical Current Ratio of Consolidated Edison (ED)

In 2023, Consolidated Edison (ED) reported a Current Ratio of 1.0116, down from 1.1443 in 2022, indicating a decrease. This change earns a score of 0 in the Piotroski Analyses for ED, highlighting a potentially weaker short-term financial health. Despite this year's ratio being below the previous year, it's important to note that ED's Current Ratio remains stronger than the industry median of 0.7878 in 2023. Historically, Consolidated Edison has shown fluctuations in its Current Ratio, which suggests varying efficacy in managing short-term assets and liabilities over the past two decades. The stability provided by maintaining a ratio near or above 1 is a positive aspect compared with the broader industry. Consolidated Edison's 2023 Current Ratio of 1.0116 places it above the industry median of 0.7878, indicating relatively better liquidity compared to its peers.

Number of shares not diluted?

The change in shares outstanding measures how the number of shares issued by the company evolves over time. A decrease is generally favorable as it might indicate buybacks.

Historical outstanding shares of Consolidated Edison (ED)

Between 2022 and 2023, Consolidated Edison (ED) saw its outstanding share count decrease from 354,500,000 to 347,700,000. This reduction of roughly 6.8 million shares is beneficial for shareholders. Historically speaking, the change fits a 20-year trend where outstanding shares rose from 221,800,000 in 2003 to peak at 354,500,000 in 2022. Thus, over two decades, the number of shares had mainly been increasing. A reduction, therefore, stands out as a strategic move, often intended to enhance shareholder value by consolidating ownership and improving metrics like earnings per share. Therefore, for the Piotroski criteria, this trend earns Consolidated Edison a point.

Operating of Consolidated Edison (ED)

Cross Margin is growing?

The Gross Margin criterion examines the company's ability to maintain and improve its profitability from its core operations. A higher Gross Margin indicates more efficiency in converting revenue into actual profit, showing effective cost control and pricing strategies.

Historical gross margin of Consolidated Edison (ED)

Comparing Consolidated Edison's Gross Margin, we see an increase from 0.4904 in 2022 to 0.505 in 2023. This increase of 0.0146 points to improved profitability from core operations, warranting a positive point under the Piotroski F-Score. Additionally, examination of the past 20 years reveals a higher gross margin 14 times, and a current margin surpassing the industry median (0.4109) indicates notable operational efficiency.

Asset Turnover Ratio is growing?

The criterion compares the Asset Turnover ratios between two consecutive years to determine efficiency improvements in utilizing assets to generate revenue. A higher turnover indicates better performance.

Historical asset turnover ratio of Consolidated Edison (ED)

In 2023, Consolidated Edison's Asset Turnover was 0.2166 compared to 0.2371 in 2022. This reflects a decrease in asset efficiency, thus scoring 0 points. Over the last two decades, the ratio showed a decline from 0.494 in 2003 to 0.2166 in 2023, indicating decreasing efficiency, concerning long-term sustainability.


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