ETSY 65.47 (+6.33%)
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Last update on 2024-06-05

Etsy (ETSY) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Comprehensive Piotroski F-Score analysis of Etsy (ETSY) for 2023 shows strong financial health with a score of 7/9. Dive into profitability, liquidity, and leverage.

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 Etsy (ETSY) 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

The Piotroski F-Score evaluates a company's financial strength based on profitability, liquidity, and operating efficiency. For Etsy (ETSY), the score is 7 out of 9. Of the nine criteria: 1. Etsy shows a positive net income, indicating financial resilience over the past years. 2. Etsy's cash flow from operations in 2023 is strong and has consistently grown. 3. Return on Assets improved from negative in 2022 to positive in 2023. 4. Operating Cash Flow is higher than Net Income, showing effective core operations. 5. Leverage increased slightly, indicating higher financial risk. 6. Current Ratio declined, suggesting weaker liquidity. 7. Shares Outstanding decreased, beneficial for shareholders. 8. Gross Margin slightly dropped but remains above industry standards. 9. Asset Turnover Ratio increased, showing better asset utilization.

Insights for Value Investors Seeking Stable Income

Etsy (ETSY) seems to be in a strong financial position with a Piotroski F-Score of 7. The company has shown good profitability, strong cash flow, and effective use of assets. Although there are concerns about increased leverage and declining liquidity, Etsy's overall financial health seems robust. Therefore, it might be worth considering as an investment, especially given the consistent growth in operating cash flow and improvement in asset efficiency.

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

Profitability of Etsy (ETSY)

Company has a positive net income?

Significance of evaluating Net Income in assessing Etsy's fiscal health

Historical Net Income of Etsy (ETSY)

A positive net income most recently observed at 307568000 is favourable. Etsy's inconsistency is evident, with losses in particular years, yet profitable outcomes are evidenced in 6 of the last 7 years before 2023, marking a sign of financial resilience.

Company has a positive cash flow?

The measure of cash flow from operations (CFO) highlights the amount of cash a company generates from its core business operations.

Historical Operating Cash Flow of Etsy (ETSY)

The cash flow from operations (CFO) for Etsy in 2023 stands at $705,513,000, a positive figure. This demonstrates that Etsy's core business operations are generating a healthy cash influx. Analyzing CFO data from 2012 to 2023, Etsy has shown a consistent upward trend in its operating cash flow, starting from as low as $9,684,000 in 2012 and peaking at $705,513,000 in 2023. This continuous improvement underscores the company's growing operational efficiency and the robustness of its business model. Therefore, Etsy earns 1 point for this criterion, indicating strong operational cash generation.

Return on Assets (ROA) are growing?

The Return on Assets (ROA) measures how efficiently a company can manage its assets to produce profits. A higher ROA indicates better efficiency.

Historical change in Return on Assets (ROA) of Etsy (ETSY)

The ROA of Etsy (ETSY) increased significantly from -0.2147 in 2022 to 0.1156 in 2023. This trend is very positive and indicates a notable turnaround in the company's ability to utilize its assets to generate earnings. Compared to the industry median ROA of 0.3592 in 2023, Etsy's performance still lags behind but shows a commendable improvement.

Operating Cashflow are higher than Netincome?

The criterion assesses whether a company's operating cash flow is higher than its net income, indicating efficient cash generation from its core business operations.

Historical accruals of Etsy (ETSY)

For Etsy (ETSY), the Operating Cash Flow in 2023 stands at $705.513 million, significantly higher than the Net Income of $307.568 million for the same year. This suggests that Etsy's core operations are generating robust cash flows relative to its reported earnings. Historically, Etsy's operating cash flow has been increasingly positive, barring some fluctuations, while net income has shown periods of both profit and loss. This trend is favorable as it demonstrates the company's financial resilience despite accounting profit fluctuations. This metric certainly warrants a positive point under the Piotroski analysis.

Liquidity of Etsy (ETSY)

Leverage is declining?

Change in Leverage assesses if the company has decreased its leverage ratio year-over-year, indicating improved financial stability.

Historical leverage of Etsy (ETSY)

Etsy's leverage has increased slightly from 0.9053 in 2022 to 0.8876 in 2023. This indicates a marginal rise in debt level compared to equity, signaling a potential uptick in financial risk. Given this increase, Etsy does not meet the Piotroski criterion for this factor for the year 2023 and earns 0 points. Historically, Etsy's leverage has shown a significant uptick since 2012, rising from virtually negligible levels to its current state, reflecting its gradual shift towards more aggressive financing over the last decade.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term obligations with its short-term assets. It is a key liquidity metric, indicating financial health.

Historical Current Ratio of Etsy (ETSY)

The Current Ratio for Etsy (ETSY) has decreased from 2.3961 in 2022 to 2.2095 in 2023, indicating a decline in its ability to cover short-term liabilities. This trend is not favorable as it suggests that Etsy's liquidity position has weakened over the past year. A healthy and increasing Current Ratio is typically preferred by investors as it indicates a robust liquid position. The industry median for 2023 is 1.6449, so even though Etsy's Current Ratio is higher than the industry average, the decline still represents a point of concern. Hence, for the Piotroski score, this criterion would receive 0 points.

Number of shares not diluted?

Change in shares outstanding refers to the variation in a company's shares available for trading. A decrease is often seen positively as it can mean share buybacks.

Historical outstanding shares of Etsy (ETSY)

The Outstanding Shares for Etsy (ETSY) have decreased from 126,778,626 in 2022 to 122,503,366 in 2023. This decrease of 4,275,260 shares (or approximately 3.37%) is a positive signal, adding 1 point for the Piotroski score. Historically, the shares outstanding have fluctuated, with notable increases in 2016 and 2018. This recent decrease may reflect share buybacks or other strategic decisions, generally considered beneficial for shareholder value.

Operating of Etsy (ETSY)

Cross Margin is growing?

The change in Gross Margin evaluates the percentage of revenue that exceeds the cost of goods sold. A higher Gross Margin indicates better profitability.

Historical gross margin of Etsy (ETSY)

Comparing Etsy's Gross Margin in 2023 (0.6985) to 2022 (0.7098), we observe a decrease from the previous year. As per the Piotroski Analysis, this sets the criteria score to 0. Over a broader timeline, Etsy's Gross Margin has generally maintained a healthy range, consistently outperforming the industry median, which was 0.3592 in 2023 compared to Etsy's 0.6985. In the last decade, the industry median values ranged from 0.3388 to 0.3690. Despite the slight decline, Etsy’s gross efficiency remains robust and significantly above the industry standards, indicating strong operational advantages.

Asset Turnover Ratio is growing?

The criterion evaluates changes in Asset Turnover ratio to assess the efficiency of a company's use of its assets to generate sales.

Historical asset turnover ratio of Etsy (ETSY)

In 2023, Etsy's Asset Turnover ratio was 1.0332 compared to 0.7936 in 2022, indicating an increase. This uptick is promising as it implies the company has improved in generating sales from its asset base, a key driver for enhanced profitability. Charting the Asset Turnover ratio over the last 20 years reveals fluctuating efficiency, but the recent increase may highlight effective asset utilization strategies. Etsy earns 1-point for this criterion as the metric rose year-over-year.


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