ETN 323.93 (+1.13%)
IE00B8KQN827Industrial ProductsSpecialty Industrial Machinery

Last update on 2024-06-05

Eaton (ETN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Eaton (ETN) achieves an impressive Piotroski F-Score of 8/9 for 2023, reflecting strong financial health and promising investment potential.

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: 8

We're running Eaton (ETN) 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?
1
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score is a measure to identify strong, undervalued stocks, based on nine criteria in profitability, liquidity, and leverage, with a score range of 0 to 9. Eaton (ETN) achieves a high score of 8, indicating strong financial health. Key highlights include positive net income, a significant rise in cash flow from operations, increased Return on Assets, positive operating cash flow higher than net income, declining leverage, improving current ratio, rising gross margin, and better asset turnover ratio. However, Eaton loses a point due to an increase in outstanding shares, impacting potential ownership dilution.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 8, Eaton (ETN) demonstrates strong financial health, making it an attractive option for investors seeking robust, undervalued stocks. Highlighted by consistent profitability, improved operational efficiency, and sound liquidity, Eaton's positive financial trends showcase its investment appeal. Nevertheless, potential investors should consider the slight increase in outstanding shares. Overall, Eaton is worth further investigation for its solid performance and promising financial characteristics.

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

Profitability of Eaton (ETN)

Company has a positive net income?

The criterion examines the net income of the company to determine if it is positive or negative, awarding 1 point for positive net income and 0 for negative.

Historical Net Income of Eaton (ETN)

For Eaton (ETN), the net income for the year 2023 stands at $3,218,000,000, which is clearly positive. Over the past 20 years, Eaton has consistently shown positive net income except for a dip in 2009 where it fell to $383 million, showcasing resilience and profitability. Notably, the net income has steadily increased over recent years from $1.41 billion in 2020 to the current $3.218 billion in 2023, marking a commendable growth trajectory. Therefore, for the criterion, Eaton receives 1 point for exhibiting positive net income, which is a strong indicator of its robust financial health and management effectiveness. This trend indicates good profit generation and strong business performance, contributing positively to the overall Piotroski Score.

Company has a positive cash flow?

Assessing the Cash Flow from Operations (CFO) is crucial in understanding the underlying financial health of Eaton, as a positive CFO indicates strong operational performance.

Historical Operating Cash Flow of Eaton (ETN)

Eaton's Cash Flow from Operations (CFO) for 2023 stands at $3,624,000,000, which is indeed positive. This is a significant indicator of the company's robust operational performance. Historically, Eaton's CFO has shown a general upward trend over the past 20 years, with notable increases especially from 2019 onwards where it was $3,451,000,000. The 2023 CFO represents a remarkable jump from $2,533,000,000 in 2022 to $3,624,000,000 in 2023, demonstrating a strong recovery and growth. This trend is decidedly favorable for Eaton as it implies solid internal cash generation, which is critical for ongoing investments, paying down debt, and returning capital to shareholders. Thus, for the Piotroski criterion, Eaton scores 1 point for having a positive CFO.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. An increase signifies better asset efficiency.

Historical change in Return on Assets (ROA) of Eaton (ETN)

Eaton's ROA increased from 0.0713 in 2022 to 0.0876 in 2023. This rise indicates enhanced asset efficiency, a positive sign. Over 20 years, Eaton's upswing in 2023 aligns with operational cash flow trends, bolstering confidence.

Operating Cashflow are higher than Netincome?

Assessing if operating cash flow is higher than net income is crucial as it indicates a company's ability to generate sufficient cash flow to maintain operations and support net profit.

Historical accruals of Eaton (ETN)

In 2023, Eaton's operating cash flow was $3.624 billion, which is indeed higher than its net income of $3.218 billion. This difference adds 1 point to the Piotroski score, indicating a positive sign of the company’s operational efficiency and cash generation capability. Historically, Eaton has shown steady growth in operating cash flow from $874 million in 2003 to $3.624 billion in 2023, outpacing net income in several years. Observing figures from the past 20 years: operating cash flow and net income ratios displayed a healthy financial pattern with relatively low accruals, especially in 2023 with accruals at 0.0943, evidencing reliable earnings quality.

Liquidity of Eaton (ETN)

Leverage is declining?

Change in Leverage examines the relative level of a company's debt compared to its assets over two periods.

Historical leverage of Eaton (ETN)

In the case of Eaton (ETN), comparing the Leverage of 0.2507 in 2022 with the Leverage of 0.2284 in 2023, the leverage has decreased in 2023. This is a positive indicator in the Piotroski analysis framework as it suggests improved financial stability and less risk. Historically, ETN's leverage has shown fluctuations, with notable increases in years like 2012 and 2022. However, the decrease to 0.2284 in 2023 signifies a prudent approach in managing debt, thus earning 1 point for this criterion.

Current Ratio is growing?

Change in Current Ratio: This metric provides insight into the company's ability to meet short-term obligations with its current assets. An increase suggests improving liquidity and financial health, while a decrease could indicate potential liquidity issues.

Historical Current Ratio of Eaton (ETN)

In 2023, Eaton's (ETN) Current Ratio is 1.507, up from 1.3752 in 2022. This increase to 1.507 reflects enhanced liquidity, marking an upward trend. Over the last 20 years, Eaton's Current Ratio fluctuated, peaking at 1.7768 in 2013 and dropping to 1.0415 in 2021. The 2023 ratio, although below the industry median of 1.7757, signifies improvement over the previous year. While the company’s current ratio remains consistently lower than the industry median, the positive trend in 2023 earns it 1 point under the Piotroski scale, highlighting progress in liquidity management.

Number of shares not diluted?

Change in shares outstanding reflects a firm's capital management strategy, impacting ownership dilution and potentially investor returns.

Historical outstanding shares of Eaton (ETN)

Eaton (ETN) has seen its outstanding shares increase from 398,700,000 in 2022 to 399,100,000 in 2023. This increase of 400,000 shares reflects a growth trend in its shares, and thus, this criterion would score 0 points in the Piotroski F-Score model, which favors a reduction in shares. Over the last two decades, ETN's shares outstanding have frequently fluctuated, showing peaks and moderate reductions, but rising more significantly from 2003 to 2023.

Operating of Eaton (ETN)

Cross Margin is growing?

Change in gross margin is a critical metric for assessing a company's profitability efficiency over time, indicating cost management and pricing strategy efficacy.

Historical gross margin of Eaton (ETN)

The gross margin for Eaton (ETN) increased from 0.3319 in 2022 to 0.3636 in 2023. This increase in gross margin indicates an improvement in the productivity and cost efficiency of the company. Over the last 20 years, Eaton's gross margin has generally trended upward, growing from 0.2685 in 2003 to the current level. Although there were periods of fluctuation, such as a significant dip during the 2020 pandemic, the overall trend has been positive. Notably, Eaton's gross margin in 2023 outperformed the industry median gross margin of 0.3492, marking a strong position in the market. This performance is buoyed by improved operational efficiencies and possibly a more favorable product mix or pricing strategy. Consequently, Eaton would score 1 point under the Piotroski F-score for this criterion, signaling a good trend in profitability.

Asset Turnover Ratio is growing?

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

Historical asset turnover ratio of Eaton (ETN)

In 2023, Eaton (ETN) recorded an asset turnover ratio of 0.6316, compared to 0.6011 in 2022. This represents an increase of approximately 5.1%. Given this improvement in asset efficiency, a point is added. Historical data spanning the last 20 years reveal that the asset turnover ratio peaked at 1.1522 in 2005 and recently rebounded from a low of 0.5526 in 2020, suggesting a recoverative trend. However, current levels are still significantly below historical highs, indicating room for further optimization. Overall, the upward trend is positive for Eaton’s operational efficiency.


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