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Last update on 2024-06-06

FirstEnergy (FE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Detailed Piotroski F-Score analysis of FirstEnergy (FE) for 2023, achieving a score of 5/9. An in-depth metrics review reveals profitability and financial stability insights.

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 FirstEnergy (FE) 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?
0
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

The Piotroski F-Score for FirstEnergy (FE) is 5 out of 9. This score evaluates the company based on 9 key criteria concerning profitability, liquidity, and operational efficiency. FirstEnergy shows strength in profitability with positive net income, growing ROA, and positive cash flow from operations. The operating cash flow exceeding net income indicates good earnings quality. However, there are concerns regarding liquidity and leverage: the current ratio and leverage worsened in 2023, and an increase in outstanding shares suggests dilution. The gross margin improved but the asset turnover ratio declined slightly.

Insights for Value Investors Seeking Stable Income

Given that FirstEnergy (FE) scored 5 out of 9 on the Piotroski F-Score, it indicates a balance of strengths and weaknesses. While the company shows good profitability and cash flow, its declining liquidity, increasing leverage, and share dilution are concerns. Potential investors might consider looking deeper into these areas to understand the risks and make an informed decision. It may be worth investigating further for balanced portfolios but keep an eye on its liquidity and leverage trends.

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

Profitability of FirstEnergy (FE)

Company has a positive net income?

Net income, which represents the company's total profit or loss after expenses have been subtracted from total revenue, is a fundamental indicator of financial health. It reflects a company's ability to generate profit from its operations and is a key measure for investors, signaling profitability trends and business stability.

Historical Net Income of FirstEnergy (FE)

FirstEnergy (FE)'s net income for 2023 stands at $1,102,000,000, indicating a positive result. By scoring +1 on the Piotroski scorecard, this signifies a robust outcome under this parameter. Historical data reveals a consistent ability to generate positive net income, with substantial peaks in 2016 ($1,348,000,000), 2021 ($1,283,000,000), and 2023 itself. Conversely, noteworthy declines include significant losses in 2015 ($-6,177,000,000) and 2017 ($-1,724,000,000). The high net income in 2023 suggests improved operational efficiency or favorable market conditions, ultimately generating positive investor sentiment. Overall, this marks a commendable financial position for FirstEnergy.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's normal operating activities. Positive CFO indicates a company's core business is healthy.

Historical Operating Cash Flow of FirstEnergy (FE)

For the year 2023, FirstEnergy (FE) reported a Cash Flow from Operations (CFO) of $1,387,000,000, which is positive. Thus, FE earns a point for this criterion. However, when viewed in the context of historical data spanning the past 20 years, this figure represents the lowest CFO recorded, marking a significant decline from previous years such as 2009 when the CFO peaked at $3,076,000,000. This downward trend could be indicative of underlying issues in the company's operational efficiency, which investors should consider despite the criterion being positively met for 2023.

Return on Assets (ROA) are growing?

Change in ROA refers to the difference in Return on Assets between two time periods. It indicates how effectively the company is utilizing its assets to generate profit.

Historical change in Return on Assets (ROA) of FirstEnergy (FE)

FirstEnergy (FE) has shown an improved Return on Assets (ROA) in the year 2023 compared to 2022. Specifically, the ROA increased from 0.89% in 2022 to 2.32% in 2023. This positive change, moving from below 1% to over 2%, signifies better asset utilization efficiency and is a positive indicator for investors, awarding an additional 1 point in Piotroski analysis. For broader context, the 20-year historical data for FE shows fluctuating operating cash flows, whereas the industry median ROA is significantly higher, averaging around 50%. This discrepancy suggests that while FE is catching up with its past performance, it still lags behind the industry norms.

Operating Cashflow are higher than Netincome?

Operating cash flow should ideally be higher than net income because it indicates better earnings quality and cash-generating efficiency.

Historical accruals of FirstEnergy (FE)

For FirstEnergy (FE) in 2023, the operating cash flow stands at $1.387 billion, while the net income is $1.102 billion. Operating cash flow being higher than net income is a positive trend as it signifies efficient cash-generating capability. Historically, FirstEnergy's operating cash flow exceeded net income in most of the past 20 years. This persistent positive differential signifies superior earnings quality and healthy operations. Therefore, 1 point is added for this Piotroski criterion.

Liquidity of FirstEnergy (FE)

Leverage is declining?

Change in leverage analyzes the shift in financial leverage over time, indicating a company's risk profile. It is crucial for understanding debt levels and financial risk.

Historical leverage of FirstEnergy (FE)

In 2023, FirstEnergy's leverage increased slightly from 0.4599 to 0.4693 compared to 2022. This indicates a marginal rise in the company's financial risk, as higher leverage typically demonstrates increased reliance on debt for financing operations. Historically, FirstEnergy's leverage has varied significantly, dropping to as low as 0.0058 in 2013 before increasing since 2019. The upward trend over recent years could be a concern for potential investors wary of heightened financial risk. Hence, FirstEnergy scores 0 points for this criterion since leverage has increased in 2023.

Current Ratio is growing?

This criterion examines the company's Current Ratio, which is derived by dividing current assets by current liabilities. The Current Ratio measures a company's ability to meet its short-term obligations with its short-term assets. A higher Current Ratio is generally favorable as it indicates better liquidity.

Historical Current Ratio of FirstEnergy (FE)

The Current Ratio for FirstEnergy (FE) decreased from 0.6102 in 2022 to 0.4768 in 2023. This represents a reduction in liquidity, meaning the company's ability to cover its short-term liabilities with its short-term assets has worsened. Compared to the industry median, where the Current Ratio is 0.7878 in 2023, FirstEnergy's liquidity appears considerably weak. Given this decline, the score for this criterion is 0 in the Piotroski analysis.

Number of shares not diluted?

Change in Shares Outstanding measures whether the number of a company's shares has increased or decreased. A decrease is typically seen as positive since it suggests share buybacks.

Historical outstanding shares of FirstEnergy (FE)

Comparing the Outstanding Shares for FirstEnergy in 2022 and 2023, we see an increase from 571,000,000 to 573,000,000. Over the last 20 years, FirstEnergy's shares outstanding have mostly been on an upward trend, with significant increases in certain years (e.g., 2008-2009 and 2017-2018). The increase in shares outstanding in 2023 is consistent with this long-term trend, and therefore, no points should be awarded for this criterion.

Operating of FirstEnergy (FE)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold (COGS). It is important as it reflects the efficiency of a company in managing its production costs relative to its sales.

Historical gross margin of FirstEnergy (FE)

Comparing the Gross Margin for FirstEnergy (FE) in 2023, which is 0.639, with that of 2022, which was 0.6314, we see an increase. This improvement indicates better efficiency in cost management relative to its sales. Given that the 2023 Gross Margin of 0.639 is also significantly higher than the industry median of 0.4109, it shows that FirstEnergy not only improved year-over-year but is also performing much better than its industry peers. Therefore, this criterion scores 1 point.

Asset Turnover Ratio is growing?

This criterion examines how efficiently a company uses its assets to generate revenue by comparing Asset Turnover year-over-year, prioritizing higher turnover rates.

Historical asset turnover ratio of FirstEnergy (FE)

The Asset Turnover ratio for FirstEnergy (FE) slightly decreased from 0.2722 in 2022 to 0.2713 in 2023, leading to a score of 0 for this criterion. This minor reduction suggests there was no significant improvement in the company's efficiency in using its assets to generate revenue. Looking at historical data from the past 20 years, FirstEnergy has seen fluctuations in its Asset Turnover ratio. While it peaked in 2008 at 0.4155, it has generally trended downward since then. The consistent decline indicates potential issues in asset utilization. In 2016, for instance, the ratio was at 0.3055, emphasizing a significant decrease by 2023. Maintaining or increasing this metric is crucial as it directly impacts profitability and overall financial health. Thus, the result of a decrease in 2023 reflects negatively on this aspect of the Piotroski score.


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