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Last update on 2024-06-06

Fortive (FTV) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Fortive (FTV) achieves an impressive Piotroski F-Score of 8/9 for 2023, indicating strong financial health and investment potential.

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: 8

We're running Fortive (FTV) 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?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score assesses a company's financial health, profitability, liquidity, and efficiency, and can score between 0 to 9. Fortive (FTV) has a strong Piotroski F-Score of 8, indicating a healthy financial position. The company's profitability is evident with a positive net income of $865.8 million in 2023 and a growing Return on Assets (ROA). Fortive's operational efficiency is reflected in its positive and growing Operating Cash Flow (OCF) which exceeds its net income. However, leverage has risen, which is a slight concern. On liquidity, the company’s Current Ratio has significantly improved to 2.05, and the number of outstanding shares has decreased, adding to its financial strength. Improved Gross Margin and Asset Turnover also suggest better profitability and asset use efficiency over time.

Insights for Value Investors Seeking Stable Income

Given Fortive's strong Piotroski F-Score of 8 out of 9, the company's financial health appears robust. The company's profitability, liquidity, and operational efficiency are all trending positively. However, potential investors should keep an eye on the increased leverage. Nonetheless, Fortive seems to be a good candidate for further consideration as a potentially undervalued investment.

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

Profitability of Fortive (FTV)

Company has a positive net income?

Net income is the company's total earnings, reflecting its profitability over the fiscal year. Positive net income suggests efficient operations and profitability.

Historical Net Income of Fortive (FTV)

Fortive (FTV) reported a net income of $865,800,000 in 2023, which is positive. Considering the Piotroski score, this results in an addition of 1 point. Historically, the net income has mostly fluctuated above $600 million over the past 12 years, with the highest in 2018 at approximately $2.913 billion and the lowest dip in 2021 at $608.4 million. The stability in net income suggests robust profit generation, making this a positive criterion for Fortive.

Company has a positive cash flow?

Cash Flow from Operations (CFO) assesses the cash inflows generated by a company's primary business operations. It's vital as it indicates a company's ability to generate sufficient cash to maintain and grow its operations without relying heavily on external financing.

Historical Operating Cash Flow of Fortive (FTV)

For Fortive (FTV), the CFO in 2023 stood at $1,353,600,000, which is indeed positive. This positive cash flow signifies a strong cash-generating ability from its operational activities, reflecting a healthy and sustainable business. Over the last twelve years, Fortive has shown a generally upward trend in CFO, peaking in multiple years such as 2019 ($1,436,700,000). The positive cash flow over consistent years indicates sound operational efficiency and a robust financial preparation for future expansion or debt commitments, making this a favorable trend in their financial health.

Return on Assets (ROA) are growing?

Changes in ROA (Return on Assets) are imperative to measure how effectively a company is utilizing its assets to generate earnings. An increasing ROA often indicates improving efficiency or profitability and is highly regarded by investors.

Historical change in Return on Assets (ROA) of Fortive (FTV)

For Fortive (FTV), the ROA in 2023 is 0.0528, compared to 0.0467 in 2022. This increment marks an improvement in how effectively Fortive is using its assets to generate profits, gaining one point in the Piotroski Analysis. Though the absolute values are much lower than the industry's median ROA, which floats around 0.4813 in 2023, the upward trend for Fortive is a positive signal. Compared to its operating cash flow, which shows consistent growth over the years, it appears that Fortive is steadily enhancing its operational efficiency, although there's still significant room for improvement when juxtaposed with the industry's efficiency benchmarks.

Operating Cashflow are higher than Netincome?

Explain the criterion for Fortive (FTV) and why it is important to consider

Historical accruals of Fortive (FTV)

Operating cash flow (OCF) exceeding net income is generally a positive indication. This is because OCF shows the real cash generated by the company's operations, which is crucial for meeting short-term obligations and reinvesting in the business. For Fortive (FTV), we see that the OCF for 2023 stands at $1,353 million, while the net income is $865.8 million. This effort results in 1 point for the Piotroski analysis, as it indicates that the company's core operations are generating sufficient cash flow relative to its profitability. Historically, FTV's OCF has generally been above its net income, suggesting consistent performance.

Liquidity of Fortive (FTV)

Leverage is declining?

The change in leverage is crucial as it signals the company's debt levels. Lower leverage generally means reduced financial risk.

Historical leverage of Fortive (FTV)

For Fortive (FTV), the leverage ratio has increased from 0.1499 in 2022 to 0.2231 in 2023. This means the company's debt levels have risen. An increase in leverage from 0.1499 to 0.2231 points to a heightened financial risk, reflecting that the company is now more reliant on debt to finance its operations. Over a 20-year history, the leverage has fluctuated, reaching a peak of 0.4657 in 2015 and hitting a low of 0.1183 in 2021. Although the recent increase is a concern, it’s still below the levels seen in the past decade. Hence, for this criterion, Fortive scores 0 points as leverage has increased.

Current Ratio is growing?

The Current Ratio evaluates a company's ability to pay short-term obligations with its short-term assets. A higher ratio suggests improved liquidity.

Historical Current Ratio of Fortive (FTV)

The Current Ratio for Fortive (FTV) has increased significantly from 0.9083 in 2022 to 2.0497 in 2023. This upward trend is a positive indicator, suggesting an improvement in Fortive's liquidity position, giving it greater capability to cover its short-term liabilities. Despite being lower than the industry's median current ratio of 2.6482 in 2023, the increase to 2.0497 from 0.9083 aligns Fortive more closely with prevailing industry standards. Historically, Fortive's current ratio has fluctuated, but this significant increase might indicate improved financial management and a robust position amidst challenging market conditions. Hence, Fortive earns 1 point for this criterion.

Number of shares not diluted?

Change in shares outstanding reflects the company's capital activity, affecting earnings per share (EPS) and investor perception.

Historical outstanding shares of Fortive (FTV)

The outstanding shares of Fortive (FTV) decreased from 356,400,000 in 2022 to 352,500,000 in 2023. This results in a reduction of 3,900,000 shares, indicating a buyback or reduced issuance—a positive signal, as it can lead to higher EPS and shows better capital management. Over the last 12 years, the shares have fluctuated, recently increasing in 2022 before this decrease, illustrating dynamic capital activity. Therefore, Fortive earns 1 point for this criterion.

Operating of Fortive (FTV)

Cross Margin is growing?

Gross Margin reflects the percentage of total sales revenue a company retains after incurring direct costs. It's crucial to understanding profitability.

Historical gross margin of Fortive (FTV)

The gross margin for Fortive (FTV) in 2023 was 0.5926, an increase from 0.5773 in 2022, indicating improved profitability. This is favorable, especially as it outperforms the industry's median of 0.4813 in 2023. Over the last two decades, Fortive's Gross Margin has shown a general upward trend, significantly surpassing industry peers. Thus, Fortive earns 1 point for this criterion, reflecting its strong competitive position in maintaining better profitability margins.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in generating sales from its assets.

Historical asset turnover ratio of Fortive (FTV)

The Asset Turnover for Fortive (FTV) increased slightly from 0.3601 in 2022 to 0.3698 in 2023. This increase, although marginal, indicates an improvement in asset utilization to generate revenue. Historically, Fortive has seen a significant decline in its asset turnover ratio, from a peak of 1.6469 in 2013 to a low of 0.2768 in 2020. The recent uptick suggests a positive trend, possibly reflecting management's efforts in optimizing asset efficiency. Therefore, Fortive earns a point for this criterion.


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