FARO 17.15 (+1.48%)
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Last update on 2024-06-07

Faro Technologies (FARO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Detailed Piotroski F-Score analysis of Faro Technologies (FARO) for 2023, showing financial health, profitability, liquidity, and operating 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: 5

We're running Faro Technologies (FARO) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
0
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
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 measures the financial health of a company on a scale of 0 to 9, where a higher score indicates a stronger financial position. Faro Technologies (FARO) has a Piotroski score of 5, signifying an average financial position. The company showed positive cash flow but had a negative net income and a declining return on assets. Although the current ratio improved, indicating better liquidity, the leverage increased which is a negative sign. The asset turnover ratio is slightly better but gross margins have declined. Historical data shows fluctuations in financial health with recent trends demonstrating certain weaknesses.

Insights for Value Investors Seeking Stable Income

Faro Technologies (FARO) presents a mixed case for potential investors. The Piotroski score of 5 suggests that while the company shows some financial strengths, there are several concerning aspects, such as the negative net income, increased leverage, and declining gross margins. Prospective investors should be cautious and consider additional in-depth analysis or consult financial experts before investing. It might be worth monitoring the company over time to see if it overcomes these challenges and improves its financial position.

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

Profitability of Faro Technologies (FARO)

Company has a positive net income?

Net income is the total profit of a company after all expenses and taxes. A positive net income indicates profitability, while a negative net income indicates a loss.

Historical Net Income of Faro Technologies (FARO)

The net income for Faro Technologies in 2023 is -$56.58 million, indicating a negative net income. Over the past 20 years, the net income has shown fluctuations with both profits and losses. More recent trends, particularly the substantial losses in 2019, 2020, 2021, and the wider losses in 2022 and 2023, highlight underlying challenges. Given the consistent trend of losses in recent years, this criterion does not bode well and scores 0 points under the Piotroski analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) assesses the cash generated by a company's regular business operations, crucial for understanding real earnings strength.

Historical Operating Cash Flow of Faro Technologies (FARO)

For FARO Technologies, with the 2023 CFO standing at $1,075,000, it is indeed positive. Historically, analyzing the last two decades of CFO reveals significant fluctuations. For instance, years such as 2005 and 2021 observed sizable losses of -$3,404,000 and -$13,476,000 respectively, while 2007 and 2011 saw robust positive cash flows of $21,595,000 and $27,873,000. These variations illustrate a volatile cash generation capability, but the positive CFO in 2023 is a favorable sign, earning FARO a point according to the Piotroski criteria.

Return on Assets (ROA) are growing?

Change in ROA measures whether the company has been able to effectively use its assets to generate earnings. A positive change is a sign of improving efficiency.

Historical change in Return on Assets (ROA) of Faro Technologies (FARO)

Comparing the ROA of -0.1157 in 2023 to -0.0561 in 2022, it is evident that Faro Technologies (FARO) has experienced a decline in its ability to generate returns on its assets. This represents a worsening trend as the ROA has deteriorated by 0.0596 points. Over the past 20 years, Faro's ROA has shown significant volatility, but the continuous decline in recent years is concerning. Furthermore, when compared to the industry median ROA, which was 0.4813 in 2023, Faro significantly underperformed. Hence, this trend is unfavorable and scores 0 points according to the Piotroski Analysis criteria.

Operating Cashflow are higher than Netincome?

This criterion examines whether the operating cash flow exceeds net income.

Historical accruals of Faro Technologies (FARO)

In 2023, Faro Technologies reported an operating cash flow of $1.075 million, which was notably higher than its net income of -$56.577 million. This result is significant because it demonstrates that despite negative net income, the company managed to generate positive cash flow from its core operations. This discrepancy between net income and operating cash flow could indicate issues like poor earnings quality or substantial non-cash charges affecting net income. Historically, Faro Technologies has seen fluctuating results in its cash flow from operations with significant positive cash flow in certain years like 2012's $27.873 million and drastically negative values in others like 2019's -$62.147 million in net income. For 2023, since the operating cash flow exceeds the net income, a point is added according to Piotroski's rule.

Liquidity of Faro Technologies (FARO)

Leverage is declining?

Change in leverage pertains to the variation in financial leverage from the previous year. It assesses whether the company’s reliance on debt for financing has increased or decreased.

Historical leverage of Faro Technologies (FARO)

Faro Technologies saw its leverage spike from 0.0309 in 2022 to 0.1656 in 2023. This indicates a significant increase in the company's reliance on debt for financing. Over the past 20 years, FARO maintained relatively low leverage with values mostly under 0.0014 until recent years where it began rising sharply. The notable increase in 2023 suggests a potential strategic shift in using debt, which might raise red flags for risk-averse investors. Therefore, no point is awarded for this criterion.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with its short-term assets. An increase in Current Ratio generally indicates an improvement in liquidity.

Historical Current Ratio of Faro Technologies (FARO)

The Current Ratio of Faro Technologies increased from 2.0648 in 2022 to 2.3095 in 2023, showing an improved liquidity position. This gain implies a better ability to cover short-term liabilities with short-term assets, earning 1 point in the Piotroski analysis. Given the 20-year trend, the company's ratio has consistently stayed above the industry median, though it has declined overall since the early 2000s. Specifically, its ratio peaked above 5 in 2003 and 2010 and has decreased steadily with minor fluctuations, yet remaining higher than industry medians which mostly hovered below 3.

Number of shares not diluted?

The change in shares outstanding measures the total number of shares of a company that are currently owned by all its shareholders. A lower number of outstanding shares is often seen as positive as it may reflect buybacks and an increased EPS (Earnings Per Share) for investors.

Historical outstanding shares of Faro Technologies (FARO)

Based on the data provided, FARO Technologies' outstanding shares have increased from 18,318,191 in 2022 to an anomalous 0 in 2023. It's important to clarify this anomaly as shares cannot be zero if a company is still operating. Historically, the number of shares has seen various changes such as 17,769,958 in 2020, 18,187,946 in 2021, and 18,318,191 in 2022. However, a reduction over time could suggest a positive trajectory when aligned to strategic buyback programs. For now, the assessment should be held off for factual correction.

Operating of Faro Technologies (FARO)

Cross Margin is growing?

Change in Gross Margin measures a company's efficiency in producing goods more profitably and controlling production costs.

Historical gross margin of Faro Technologies (FARO)

For FARO Technologies, the Gross Margin for 2023 stands at 0.4598, a noticeable decrease from 0.5083 in 2022. The trend is therefore negative and this criterion receives no points. In the broader context, FARO has been experiencing a steady decline in Gross Margin over the past 20 years, starting from 0.5888 in 2003. Comparatively, its gross margin has been consistently above the industry median, which stood at 0.4813 in 2023. FARO's ability to maintain historically higher Gross Margins than the industry median can be attributed to its efficient production processes and cost controls. However, the sharp decline in 2023 suggests that recent changes in operating conditions or market dynamics might be affecting its ability to maintain the same level of profitability on its goods sold.

Asset Turnover Ratio is growing?

Asset Turnover Ratio signifies how efficiently a company utilizes its assets to generate sales.

Historical asset turnover ratio of Faro Technologies (FARO)

For Faro Technologies (FARO), the Asset Turnover ratio has increased from 0.7256 in 2022 to 0.7338 in 2023, indicating a slight improvement in the efficiency of asset utilization. This uptick, although marginal, is a positive sign and earns the company an additional point based on the Piotroski criteria. Over the past 20 years, the Asset Turnover ratio has seen a notable decline from 1.1295 in 2003, reaching its lowest at 0.5968 in 2009 and observing a gradual recovery thereafter. This upward trend since 2020 reflects a long-term strategic improvement in the firm’s operational efficiency, making this recent increase a part of a larger positive narrative.


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