Last update on 2024-06-04

Fresenius SE (FRE.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Fresenius SE (FRE.DE) achieves a Piotroski F-Score of 5/9 for 2023, indicating moderate financial health amidst fluctuating performance metrics.

Short Analysis - Piotroski Score: 5

We're running Fresenius SE (FRE.DE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score for Fresenius SE (FRE.DE) is calculated based on nine financial criteria measuring profitability, liquidity, and efficiency, with a score between 0 and 9. Fresenius SE scores a 5, indicating moderate financial health. The analysis reveals a negative net income for 2023, decline in return on assets, and an increase in outstanding shares which are drawbacks for profitability. Positives include a strong operating cash flow, improved leverage, and increased asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Fresenius SE scores a middle-of-the-road 5 on the Piotroski F-Score. The negative net income and decreased return on assets are concerning, but solid operating cash flow and improved use of assets indicate some strengths. As an investor, it's worth conducting further research into the reasons behind these mixed signals. Consider factors like future earnings potential, industry trends, and the impact of one-time expenses. Overall, more detailed investigation and comparison with peer companies are advisable before making an investment decision.

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

Profitability of Fresenius SE (FRE.DE)

Company has a positive net income?

Net income, the total profit of a company after taxes and expenses, is critical for evaluating profitability.

For Fresenius SE (FRE.DE), the net income in 2023 stands at -€594 million, which is negative. Over the past two decades, this is a marked deviation from the company's historical trend of profitability. In 17 out of the last 20 years, Fresenius reported substantial positive net income, with peaks like €2.027 billion in 2018 and 2023 being the only year of negative income in this period. This negative trend signals financial distress or significant challenges, resulting in a score of 0 for this Piotroski criterion.

Company has a positive cash flow?

Operating Cash Flow (OCF) indicates the cash that a company generates from its regular business activities. It's vital for evaluating the financial health.

In 2023, Fresenius SE recorded an operating cash flow of €4.456 billion, which is positive. This is encouraging for investors, reflecting robust cash-generating capabilities. Historically, the trend in Fresenius SE's OCF has shown consistent growth over the past 20 years, with notable peaks in recent years. As cash flow directly impacts a company's ability to sustain operations, settle debts, and invest in future growth, the positive figure adds a valuable point to Fresenius SE in the Piotroski Score, indicating solid financial health. This favorable trend underscores the company's operational efficiency and financial stability.

Return on Assets (ROA) are growing?

The change in ROA evaluates a company's efficiency in generating profits from its assets over time.

The Return on Assets (ROA) for Fresenius SE decreased from 0.0185 in 2022 to -0.0098 in 2023, indicating a decline in operational efficiency. This metric is critical because a lower ROA suggests the company is generating less profit relative to its assets. Considering the additional data, Fresenius's ROA has seen fluctuations in the past 20 years, but the industry median ROA remained relatively stable, around 0.33. Hence, Fresenius’s recent negative ROA, coupled with an industry median that is considerably higher, raises concerns about the company’s profitability. Therefore, based on the given trend, no points can be added for this criterion, and the score is set to 0.

Operating Cashflow are higher than Netincome?

Comparing Operating Cash Flow (OCF) to Net Income reveals the quality of earnings, indicating how much true cash the company is generating from its operations.

In 2023, Fresenius SE (FRE.DE) reported Operating Cash Flow (OCF) of €4,456 million and Net Income of -€594 million. Given that OCF is significantly higher than Net Income, it undeniably adds a positive note to Fresenius' financial evaluation, earning it 1 point in this Piotroski criterion. Typically, a higher OCF compared to Net Income is a good indication of robust financial health, suggesting that the core business operations are generating ample cash. Over the past 20 years, it's noticeable that Fresenius has consistently maintained strong OCF—a positive trend. Although the Net Income experienced a substantial drop in 2023, the stable and high OCF mitigates concerns, hinting at potential non-cash charges or one-time expenses negatively impacting net profits for the year but not annual cash flows. Thus, this trend is beneficial for Fresenius.

Liquidity of Fresenius SE (FRE.DE)

Leverage is declining?

This criterion evaluates whether the company's leverage or debt ratio has decreased compared to the previous year, indicating improved financial stability and lower risk.

In 2023, the leverage for Fresenius SE stood at 0.2926, down from 0.3237 in 2022. This signifies a positive trend as the company has managed to reduce its reliance on debt. Historically, examining the leverage data over the past 20 years reveals periods of fluctuations, but the recent decrease can be seen as a positive sign of financial prudence. For instance, leverage peaked at 0.3355 in 2013 but has generally ranged between 0.2437 and 0.3434. The 2023 leverage value shows a commendable effort towards enhancing financial stability by reducing debt levels, earning 1 point for this criterion.

Current Ratio is growing?

The Current Ratio is an important liquidity metric that indicates a company's ability to pay short-term obligations with its short-term assets. An increasing Current Ratio suggests improved liquidity and financial health.

The Current Ratio for Fresenius SE has slightly increased from 1.3383 in 2022 to 1.3419 in 2023. This marginal increase (+0.0036) is a positive sign, albeit modest, and suggests slightly improved liquidity. Compared to the industry median, which stands at 1.2826 for 2023, Fresenius SE is performing above average in terms of liquidity. Therefore, we assign 1 point for this criterion, recognizing this subtle yet favorable change in financial health.

Number of shares not diluted?

Change in shares outstanding examines if a company has issued new shares or bought back shares. It is crucial as it affects earnings per share and shareholder value.

Based on the data, Fresenius SE's outstanding shares increased from 561,264,305 in 2022 to 563,237,277 in 2023. This increase signals that the company issued additional shares, diluting existing shareholders' equity. Therefore, Fresenius SE does not gain a point in the Piotroski Analysis for this criterion. Historical data indicates a general rising trend in outstanding shares over the past 20 years, reaching 563,237,277 shares in 2023, up from 123,103,032 in 2003. This consistent increase could reflect ongoing capital raising efforts or share-based compensations, though it dilutes equity.

Operating of Fresenius SE (FRE.DE)

Cross Margin is growing?

Gross Margin assesses the percentage of revenue exceeding the cost of goods sold and reveals how well a company controls costs.

The Gross Margin for Fresenius SE has decreased from 0.2509 in 2022 to 0.2268 in 2023. This results in a 0 point according to the Piotroski Analyses. Over the last 20 years, the Gross Margin has seen a steady decline from a peak of 0.3413 in 2011 to its lowest in 2023. Compared to the industry median, Fresenius has consistently trailed, especially recently when the industry median stands at 0.3298 for 2023. Therefore, the decreasing trend is not favorable.

Asset Turnover Ratio is growing?

Change in Asset Turnover assesses the efficiency with which a company's assets are used to generate sales.

In 2023, Fresenius SE (FRE.DE) saw an Asset Turnover of 0.3665 compared to 0.2903 in 2022, indicating an increase. This upward trajectory is positive, suggesting that the company has enhanced its efficiency in utilizing its assets to generate revenue. Historically, Fresenius SE has experienced higher asset turnovers, peaking at 0.8795 in 2004. Despite a general downward trend over the past two decades, the recent increase is a favorable sign, meriting 1 point, as it reflects improved operational efficiency.