ESS 280.85 (+0.75%)
US2971781057REITsREIT - Residential

Last update on 2024-06-07

Essex Property Trust (ESS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Detailed Piotroski F-Score analysis of Essex Property Trust (ESS) for 2023. Explore its financial metrics, including profitability, liquidity, and 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.
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Short Analysis - Piotroski Score: 7

We're running Essex Property Trust (ESS) 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?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score for Essex Property Trust (ESS) is 7 out of 9, indicating a strong financial position. The criteria include profitability (positive net income and cash flow, rising ROA, higher operating cash flow than net income), liquidity (leverage not declining but shares undiluted), and efficiency (gross margin slightly down but asset turnover up). Over the long term, ESS shows consistent profitability and operational efficiency, although it lags in leverage and recent gross margin performance.

Insights for Value Investors Seeking Stable Income

Essex Property Trust (ESS) appears to be a strong and potentially undervalued stock, given its high Piotroski F-Score. The stock stands out for its consistent profitability and efficient cash generation, which are promising for long-term investors. However, potential investors should be cautious about the rising leverage and recent slight decrease in gross margin, which could impact financial stability and profitability. Overall, it is worth exploring further for investment.

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

Profitability of Essex Property Trust (ESS)

Company has a positive net income?

Net income represents a company's total earnings or profit over a specific period. A positive net income indicates profitability, while a negative net income signifies losses.

Historical Net Income of Essex Property Trust (ESS)

For the fiscal year 2023, Essex Property Trust (ESS) reported a net income of $405,825,000, which is positive. This indicates that the company is profitable for the year, adding 1 point for this criterion. Historically, examining ESS's net income over the last 20 years shows a generally rising trend, with only slight fluctuations. Specifically, from 2003's net income of $37,947,000 to its peak in 2020 at $568,870,000, the figures illustrate strong financial performance over an extended period. The marginal decreases observed in subsequent years till 2023 suggest continued profitability, albeit with some variability. This consistent profitability is a good indicator of the company's robust long-term financial health.

Company has a positive cash flow?

Evaluating the cash flow from operations (CFO) gives insight into the liquidity and sustainability of a company's day-to-day operations, vital for long-term profitability.

Historical Operating Cash Flow of Essex Property Trust (ESS)

For Essex Property Trust (ESS), the CFO in 2023 was $980,064,000, which is positive. Over the past 20 years, the company has consistently generated positive operating cash flow, rising from $103,320,000 in 2003 to its current value. This long-term trend not only signifies operational efficiency and sound financial health but also highlights management's ability to enhance the company's ability to generate cash. Consequently, ESS earns 1 point for having positive CFO. This consistent upward trajectory strengthens investor confidence and suggests an enduring, robust operating model.

Return on Assets (ROA) are growing?

Comparison of ROA between consecutive years assesses the firm's profitability relative to its assets, indicating operational efficiency and financial health.

Historical change in Return on Assets (ROA) of Essex Property Trust (ESS)

In 2023, Essex Property Trust (ESS) achieved an ROA of 0.0328, slightly higher than the 0.0322 noted in 2022. This upward trend earns the company a point in the Piotroski Score, as it implies an enhancement in profitability and asset utilization. Despite this improvement, it's important to view these numbers in the broader context. Over the last two decades, the operating cash flow of ESS generally shows a rising trajectory, underscoring a positive trend in the company's ability to generate cash. However, ESS's ROA remains considerably lower than the industry median, which floats between 0.4168 and 0.6246 over the same period. This significant disparity suggests that ESS lags behind industry peers in converting its assets into earnings. Consequently, while the modest rise in ROA for 2023 is a positive sign, ESS must strive for higher efficiency to align more closely with industry standards.

Operating Cashflow are higher than Netincome?

Determine if the operating cash flow is higher than the net income and why this is important for investors.

Historical accruals of Essex Property Trust (ESS)

In 2023, Essex Property Trust reported an operating cash flow of $980,064,000 compared to a net income of $405,825,000. Since the operating cash flow is significantly higher than the net income, Essex earns 1 point in the Piotroski analysis for this criterion. This is important for investors because a higher operating cash flow compared to net income indicates strong internal cash generation from the company's core business operations, reassuring investors of the company's ability to meet its financial obligations and reinvest in growth opportunities. When analyzing the last 20 years, it is evident that except for a few instances, the operating cash flow has consistently been higher than the net income, showcasing a prudent management strategy and robust financial health which could be valuable for long-term investment.

Liquidity of Essex Property Trust (ESS)

Leverage is declining?

Change in leverage examines the year-over-year difference in a company's debt-to-equity ratio and offers insights into the company's financial risk and stability.

Historical leverage of Essex Property Trust (ESS)

In 2023, Essex Property Trust's leverage ratio increased to 0.5073 from 0.4829 in 2022. This increment indicates a higher reliance on debt financing, which translates into greater financial risk and reduced financial flexibility. When observing the historical data from the past 20 years, leverage ratios have fluctuated, yet a general downward trend was observed until 2018. While a leverage increase might suggest aggressive expansion or investment, it compromises the firm's stability during financial downturns. Given that leverage rose, we assign 0 points for this criterion.

Current Ratio is growing?

Explain the criterion for Essex Property Trust (ESS) and why it is important to consider

Historical Current Ratio of Essex Property Trust (ESS)

The Current Ratio assesses a company’s ability to cover its short-term obligations with its short-term assets, effectively measuring liquidity. A higher Current Ratio typically indicates better liquidity and financial health.

Number of shares not diluted?

Change in Shares Outstanding considers whether a company has diluted its shareholders by issuing new shares or if it has made share buybacks.

Historical outstanding shares of Essex Property Trust (ESS)

In 2023, the number of Outstanding Shares for Essex Property Trust (ESS) decreased to 64,252,232 from 65,079,764 in 2022. This indicates a reduction in share count and can be interpreted as a positive trend. When a company buys back its shares, it increases the ownership percentage of each existing share, often leading to higher share prices. Given the long-term data which shows fluctuations with overall increases and some recent decreases, the latest reduction could be seen as a strategic move to enhance shareholder value. Therefore, this criterion scores 1 point as the decrease in Outstanding Shares is favorable.

Operating of Essex Property Trust (ESS)

Cross Margin is growing?

Gross margin is a company's total sales revenue minus its cost of goods sold (COGS), divided by total sales revenue and expressed as a percentage. The metric is significant as it provides insight into how efficiently a company is producing its goods compared to its competitors, which can impact profitability.

Historical gross margin of Essex Property Trust (ESS)

The Gross Margin for Essex Property Trust (ESS) decreased slightly from 0.6839 in 2022 to 0.6817 in 2023. Consequently, this criterion does not earn a point, resulting in a score of 0. While the change is slight, it nonetheless represents a decrease in the proportion of revenue that the company retains as gross profit. Over a longer timeframe, the company's Gross Margin has typically been higher than the industry median, indicating competitive efficiency. However, the recent decline, although modest, may warrant attention as it could signify emerging cost pressures or challenges in maintaining pricing power relative to expenses.

Asset Turnover Ratio is growing?

The Asset Turnover ratio measures how efficiently a company uses its assets to generate sales. A higher ratio indicates better performance.

Historical asset turnover ratio of Essex Property Trust (ESS)

Comparing the Asset Turnover ratio of Essex Property Trust (ESS) from 2022 to 2023 reveals an increase from 0.1267 to 0.135. This improvement suggests that ESS has become more efficient in utilizing its assets to generate revenue. Therefore, the asset turnover has increased, adding 1 point in the Piotroski Analysis score. This is notable as efficiency plays a crucial role in maximizing returns for investors. Additionally, looking at the historical data, the Asset Turnover ratio has seen fluctuations, but the recent rise marks a positive trend. The ratio has moved from a lower performance (-0.1157 in 2014) towards better asset utilization in recent years.


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