Last update on 2024-06-07

F5 (FFIV) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Discover F5 Networks (FFIV) Piotroski F-Score analysis for 2023 with a final score of 8/9. Learn about profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 8

We're running F5 (FFIV) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a measure that helps evaluate a company's financial strength based on nine criteria related to profitability, liquidity, and leverage. F5 Networks (FFIV) scored 8 out of 9, indicating a strong and stable financial position. The company shows positive net income, positive cash flow, increasing return on assets, and stronger cash flow compared to net income. Their leverage has decreased, current ratio has grown, there are fewer shares outstanding, and asset turnover has improved. However, the gross margin has slightly decreased over the past year.

Insights for Value Investors Seeking Stable Income

With a solid Piotroski F-Score of 8, F5 Networks (FFIV) demonstrates strong financial health, making it an attractive option for investors. The company's consistent profitability, robust cash flow generation, and reduced leverage point toward a well-managed and stable organization. While some areas like the gross margin and long-term asset turnover trends show room for improvement, the overall financial performance is commendable. Investors seeking a relatively strong and stable company should consider looking more closely into F5 Networks as a potential investment opportunity.

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

Profitability of F5 (FFIV)

Company has a positive net income?

Calculate the net income for a company. A positive net income indicates profitability and a healthy financial state.

The net income for F5 (FFIV) in 2023 is $394,948,000, which is indeed positive. Thus, we add 1 point for this criterion. Looking back at the historical data for the last 20 years, F5 has consistently shown positive net income figures. The consistency in profitability underscores a robust business model and operational efficiency. Especially notable is the steady increase over the years from a mere $4,087,000 in 2003 to the impressive figure in 2023, reflecting significant growth.

Company has a positive cash flow?

This criterion evaluates if a company’s Cash Flow from Operations (CFO) is positive, indicating the company's core business operations generate cash.

For the fiscal year of 2023, F5 Networks (FFIV) reported a positive Cash Flow from Operations (CFO) figure of $653,409,000. This is a favorable indicator and aligns with a consistent trend of positive operating cash flows for the past 20 years. Exceptions to higher values in recent history include dips to $442,631,000 in 2022 which have been rectified, as evidenced by the recent improvement. Therefore, this criterion scores 1 point as the cash flow is positive, indicating robust cash generation capabilities from core operations.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is a measure of how efficiently a company generates profit from its assets compared to the previous year. An increase in ROA signifies improved profitability and is an indication of better financial health.

For F5 (FFIV), the ROA for 2023 stands at 0.0751, an increase from 0.0627 in 2022. This trend is positive and earns the company 1 point in the Piotroski Analysis. Over the last 20 years, the industry's median ROA has fluctuated, but F5's focus on operational efficiency and resource utilization seems to have paid off. By looking at operating cash flow trends, FFIV has demonstrated significant growth over the past two decades, underscoring its improving asset efficiency.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income means the company is generating more cash than the income it is reporting, indicating strong cash management and financial health. It's essential because it shows that the company's income is cash-backed and not just accounting earnings.

In 2023, F5 Networks (FFIV) has an operating cash flow of $653.4 million and a net income of $394.9 million. The operating cash flow is significantly higher than the net income, garnering a score of 1 for this criterion. Historically, F5's operating cash flow has been trending around or above its net income, reflecting robust cash generation capabilities. This trend is positive and signals a strong operational foundation. For instance, in 2020 the operating cash flow was $660.9 million compared to a net income of $307.4 million, and in 2021 it was $645.2 million contrasted with $331.2 million net income.

Liquidity of F5 (FFIV)

Leverage is declining?

Change in leverage refers to the alteration in a company's debt levels in relation to its equity, shedding light on financial risk.

For F5 (FFIV), the leverage has decreased from 0.0516 in 2022 to 0.0456 in 2023. This is a positive sign as lower leverage indicates reduced financial risk, increasing the firm's stability. Leveraging less implies the company relies less on debt financing, thus a score of 1 is accorded. Historical trends demonstrate F5's sustained effort to minimize leverage, evident from a peak of 0.1513 in 2020 to the current 0.0456.

Current Ratio is growing?

Current Ratio measures a company's ability to pay off its short-term liabilities with its short-term assets.

The Current Ratio for 2023 is 1.2553, an increase from 1.0393 in 2022. This improvement indicates a better capacity for FFIV to cover its short-term obligations, thus adding 1 point for this metric. Historically, FFIV's Current Ratio has fluctuated but was consistently below the industry median from 2013 to 2023, suggesting room for improvement despite the recent positive trend.

Number of shares not diluted?

Decrease in shares outstanding often indicates share buybacks, which can signal management's confidence and result in higher EPS.

Examining F5's shares outstanding, we note a decrease from 60,274,000 in 2022 to 59,909,000 in 2023. This change is positive as it results in a decrease of 365,000 shares (~0.6%). Historically, F5 has fluctuated in its outstanding shares, peaking at 85,137,000 in 2007 but showing a general downtrend since 2011. This recent reduction adds 1 point to the Piotroski score, reflecting management's focus on increasing shareholder value and indicating potential confidence in the company's growth prospects.

Operating of F5 (FFIV)

Cross Margin is growing?

Change in Gross Margin measures if a company’s financial health is improving. An increasing Gross Margin indicates rising efficiency.

Comparing the Gross Margin of 0.7891 in 2023 with the Gross Margin of 0.7998 in 2022 for F5 Networks (FFIV), there has been a decrease. This downward trend sets the criterion score to 0. Historically, F5 Networks has had a robust Gross Margin consistently outperforming industry median, peaking at 0.841 in 2019, as against the 2019 industry median of 0.6643. In 2023, FFIV still remains competitively high above the industry median of 0.715, thus preserving its relative efficiency despite the downward trend.

Asset Turnover Ratio is growing?

Change in Asset Turnover refers to the efficiency with which a company uses its assets to generate sales. This metric indicates whether the company is improving in efficiency, which is crucial for sustaining growth and profitability.

The Asset Turnover for F5 (FFIV) increased from 0.5248 in 2022 to 0.5346 in 2023. This increase implies an improvement in the company's ability to generate sales from its assets, indicating better operational efficiency. However, considering the additional data over the past 20 years, the Asset Turnover has significantly decreased from its highs of over 0.8 in the early 2000s and mid-2010s. While the annual trend is positive and worth 1 Piotroski point, the long-term decline warrants strategic considerations to further enhance asset utilization.