FELE 98.86 (+0.72%)
US3535141028Industrial ProductsSpecialty Industrial Machinery

Last update on 2024-06-07

Franklin Electric (FELE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Franklin Electric's Piotroski F-Score for 2023 is 5/9, reflecting its profitability, liquidity, and operational 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 Franklin Electric (FELE) 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?
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?
0

Franklin Electric (FELE) has been assessed using the Piotroski F-Score, which evaluates a company's financial strength based on profitability, liquidity, and leverage criteria. The company's net income and cash flow from operations are both positive, indicating good profitability and operational efficiency. Franklin Electric's cash flow has grown considerably over the past 20 years. However, the company's return on assets (ROA) has slightly declined, and the gross margin has decreased from 33.83% in 2022 to 33.75% in 2023. The leverage ratio has slightly increased from 0.0721 in 2022 to 0.0733 in 2023, indicating higher leverage. The current ratio has improved, and the company's shares outstanding have decreased, suggesting share buybacks. Despite these mixed results, Franklin Electric's overall Piotroski score is 5 out of 9.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, Franklin Electric may be a stock worth looking into. While the company demonstrates positive profitability and liquidity, attention should be given to its slight decline in ROA, minor increase in leverage, and marginal drop in gross margin. Investors might consider doing further research to explore these factors in more detail. If you're looking for stable and potentially undervalued investments, Franklin Electric could be considered a candidate, but weigh both the positives and the areas where the company might need improvement.

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

Profitability of Franklin Electric (FELE)

Company has a positive net income?

Net income is a key measure of a company's profitability, indicating earnings after all expenses and taxes have been deducted from total revenue.

Historical Net Income of Franklin Electric (FELE)

For Franklin Electric (FELE), the net income in 2023 is $193,272,000, which is positive. This positive figure is significant because it not only adds 1 point to the Piotroski score but also indicates good financial health and operational efficiency. Over the last 20 years, the net income has generally trended upwards, with only slight fluctuations. The highest net income before 2023 was $187,332,000 in 2022, showing a year-over-year improvement. This consistency in profitability points to robust financial management and a stable business model for Franklin Electric. Hence, we can affirmatively give a point here.

Company has a positive cash flow?

Positive Cash Flow from Operations (CFO) indicates a company's ability to generate sufficient cash to maintain and grow operations, which is vital for financial health.

Historical Operating Cash Flow of Franklin Electric (FELE)

In 2023, Franklin Electric (FELE) reported a Cash Flow from Operations (CFO) of $315.71 million, which is a significant increase compared to the previous years. Given that the CFO is positive, FELE earns a point on this criterion. This trend is highly favorable as it demonstrates the company's enhanced capacity to generate cash internally. Historically, FELE's cash flow has shown a substantial upward trend from $46.96 million in 2003 to $315.71 million in 2023, showcasing its strong financial management and consistent operational performance.

Return on Assets (ROA) are growing?

This criterion checks the change in Return on Assets (ROA) from one year to the next for Franklin Electric to gauge the efficiency of asset utilization and operational profitability.

Historical change in Return on Assets (ROA) of Franklin Electric (FELE)

Analyzing Franklin Electric's ROA, we notice a slight decline from 0.1146 in 2022 to 0.1129 in 2023. This reduction is seemingly minimal but indicates a decrease in the company's ability to generate profit from its assets. Therefore, this results in a score of 0, reflecting a drop rather than an improvement. Over the last 20 years, Franklin Electric's ROA has shown considerable fluctuations, peaking at ROA levels significantly lower than the 2023 industry median, which has hovered above 0.3 consistently, thereby suggesting a wider margin for enhancement in efficiency compared to its industry peers.

Operating Cashflow are higher than Netincome?

Explains the criterion for Franklin Electric (FELE) and why it is important to consider.

Historical accruals of Franklin Electric (FELE)

In 2023, Franklin Electric's operating cash flow was $315.71 million, significantly surpassing its net income of $193.27 million. This favorable disparity suggests robust earnings quality and implies that the company's earnings, in cash terms, outpace the income reported by accrual accounting methods. This is a positive sign for the company's financial health and operational efficiency, leading to an addition of 1 point in the Piotroski score. Over the last 20 years, the trend shows considerable variation, with operating cash flow often fluctuating. Still, the recent figures underscore a pronounced and laudable upturn.

Liquidity of Franklin Electric (FELE)

Leverage is declining?

Change in leverage assesses whether a company has reduced or maintained its leverage ratio, indicating better financial health and risk management.

Historical leverage of Franklin Electric (FELE)

Analyzing Franklin Electric's (FELE) leverage over the last 20 years shows an upward trajectory in its leverage ratio from 0.0721 in 2022 to 0.0733 in 2023. The more granular trend between these years indicates a slight increase and would result in 0 points being allocated for this criterion. Although the change from 2022 to 2023 is minimal (0.0012 or 1.66%), it is still essential to note the broader historical trend, which shows substantial fluctuation; this fluctuation encompasses a high of 0.2673 in 2008 during the financial crisis and subsequently higher peaks in 2007 and 2008—extreme years for many companies. Despite showing generally improving leverage trends in the past decade, the slight uptick from 2022 to 2023 raises questions about short-term debt management. Consequently, the financial strategy approach and situational demands affecting that year may have driven this small change, whether in operational expansion or defensive positioning.

Current Ratio is growing?

Examine and compare the company's ability to pay off its short-term liabilities with current assets in different periods.

Historical Current Ratio of Franklin Electric (FELE)

The Current Ratio of Franklin Electric (FELE) in 2023 stands at 2.9745, up from 2.1147 in 2022, indicating an increase. This is positive, thus adding 1 point to the Piotroski score. Historically, the current ratio has shown fluctuation, with the highest points in 2008 (3.9019) and lowest in 2021 (1.8299). The industry median current ratio has remained fairly stable, hovering around 1.6 and 1.8 over the past two decades, highlighting that Franklin Electric has consistently outperformed its industry peers in maintaining liquidity.

Number of shares not diluted?

Change in shares outstanding is assessed by comparing the current year's outstanding shares with the previous year's. A reduction in outstanding shares indicates share buybacks, suggesting the company is investing in itself.

Historical outstanding shares of Franklin Electric (FELE)

Between 2022 and 2023, Franklin Electric's outstanding shares decreased from 46,300,000 to 46,200,000. This decrement of 100,000 shares signifies a share buyback, typically seen as a positive signal because it indicates that the company is confident about its valuation and is returning wealth to its shareholders. Over the past 20 years, Franklin Electric has fluctuated its shares outstanding, mostly maintaining an upward trend until more recent years, where it has seen a slight decrease. Therefore, Franklin Electric scores 1 point for this criterion, as the reduction in shares may hint at a proactive strategy to bolster shareholder value.

Operating of Franklin Electric (FELE)

Cross Margin is growing?

Gross Margin measures the proportion of revenue that exceeds the cost of goods sold (COGS), essentially capturing the efficiency in production and pricing strategy.

Historical gross margin of Franklin Electric (FELE)

The Gross Margin for Franklin Electric (FELE) decreased slightly from 33.83% in 2022 to 33.75% in 2023. This reduction, although minimal, indicates less efficiency in covering the COGS compared to the previous year. Over the past twenty years, Franklin Electric's Gross Margin has exhibited some fluctuations but has generally remained competitive within the industry, often closely tracking or occasionally surpassing the industry median. For 2023, the Gross Margin remains robust but does not gain a point in the Piotroski Analysis due to the decrease.

Asset Turnover Ratio is growing?

Change in Asset Turnover evaluates the efficiency of a company in using its assets to generate revenue. A higher ratio implies better utilization of assets.

Historical asset turnover ratio of Franklin Electric (FELE)

For 2023, Franklin Electric (FELE) has an Asset Turnover of 1.2069, compared to 1.2502 in 2022. This represents a decrease, not an increase, resulting in 0 points. Looking at the historical data over the past 20 years, Franklin Electric's asset turnover has witnessed considerable fluctuations, with the highest ratio being 1.3301 in 2003 and the lowest 0.8864 in 2009. Although there have been periods where the asset turnover ratio increased, the year-on-year comparison for 2023 does not reflect an improvement in asset utilization.


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