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Last update on 2024-06-05

General Dynamics (GD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Explore the Piotroski F-Score analysis for General Dynamics (GD) in 2023, achieving a 7 out of 9. Understand the company's 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: 7

We're running General Dynamics (GD) 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?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

In 2023, General Dynamics (GD) achieved a Piotroski F-Score of 7 out of 9.This indicates the company's strong financial health. Over the past 20 years, GD has consistently maintained positive net income and showed a solid upward trend in operating cash flow. Its return on assets dipped slightly this year but has shown variability over time. The company displays excellent earnings quality, given that its operating cash flow is consistently higher than net income. GD's financial stability is shown by a conservative leverage ratio, consistent share repurchases, and an improved current ratio, although the gross margin experienced a recent decline, pointing to potential efficiency issues. Despite these challenges, the upward movement in asset turnover highlights improved operational efficiency.

Insights for Value Investors Seeking Stable Income

Based on the consistently strong financials and bolstered by a Piotroski F-Score of 7, General Dynamics is generally a sound investment. The positive trajectory in net income and cash flow demonstrates solid operational management. However, potential investors should monitor the slight decline in return on assets and gross margin for any signs of long-term issues. Overall, GD appears worthy of further examination for those seeking stable and potentially profitable investment opportunities in the defense sector.

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

Profitability of General Dynamics (GD)

Company has a positive net income?

Net income, an essential profitability measure, indicates a company's earnings after all expenses. Positive net income signals operational health.

Historical Net Income of General Dynamics (GD)

In 2023, General Dynamics (GD) reported a net income of $3,315,000,000. This positive figure gains 1 point on the Piotroski score, highlighting a resurgent financial health despite a few volatile years like 2012 where net income was negative at -$332,000,000. Over the last two decades, GD showcased a consistent upward trajectory in profitability, suggesting robust operational stability and strategic prowess. Besides 2012, GD maintained healthy profits annually, underlining its resilience and management efficiency.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the amount of cash generated by a company's regular operating activities. It is important to gauge the liquidity and operational efficiency of the company.

Historical Operating Cash Flow of General Dynamics (GD)

In 2023, General Dynamics reported a Cash Flow from Operations of $4.71 billion. This figure is undeniably positive. Over the past two decades, General Dynamics has consistently shown a positive CFO, demonstrating sustained operational efficiency and strong liquidity. Observing the trend, the highest CFO was recorded in 2023 at $4.71 billion, reflecting a progressive upward trajectory since 2003 with occasional minor fluctuations. The steadily increasing CFO indicates a well-managed operation, effective cost control, and profitability. Consequently, for this criterion, General Dynamics earns 1 point. This trend is decidedly positive as a rising CFO over a prolonged period generally signals financial health and the ability to reinvest in growth opportunities, repay debts, and return value to shareholders.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) assesses the company's ability to effectively utilize its assets to generate earnings. A rising trend in ROA indicates improved efficiency and profitability, making it a critical criterion for investors.

Historical change in Return on Assets (ROA) of General Dynamics (GD)

In 2023, General Dynamics (GD) recorded a ROA of 0.0623, slightly lower than its ROA of 0.0667 in 2022. This indicates a decline in asset efficiency by approximately 6.59% year-over-year, translating to a score of 0 for this criterion. Analyzing a 20-year time frame, GD's ROA showed variability with a peak and trough relative to its industry median. Despite improvements in operating cash flows, which rose consistently to $4.71 billion in 2023, the recent dip in ROA slightly undermines its efficiency relative to asset utilization.

Operating Cashflow are higher than Netincome?

Operating Cash Flow exceeding Net Income, This signals a higher quality of earnings as cash earnings are harder to manipulate.

Historical accruals of General Dynamics (GD)

In 2023, General Dynamics (GD) boasts an Operating Cash Flow of $4,710,000,000 compared to a Net Income of $3,315,000,000. When operating cash flow is consistently higher than net income, it is often seen as a positive indicator because it suggests that the company's profits are supported by cash, rather than accounting adjustments. This is an important consideration, as cash flows are less susceptible to accounting manipulations.Over the past two decades, GD has shown resilience in its operating cash flows, which have generally trended upwards even during economic downturns, indicating strong operational efficiency. The recent values show consistent improvement in cash flow, backing the company's earnings quality.

Liquidity of General Dynamics (GD)

Leverage is declining?

The criterion assesses whether the company's financial leverage has decreased, under the Piotroski score, indicating improved financial health.

Historical leverage of General Dynamics (GD)

General Dynamics' leverage increased from 0.205 in 2022 to 0.187 in 2023. Although a lower leverage ratio generally reflects a healthier balance sheet with less debt burden, it's also crucial to consider historical leverage data. Looking back over 20 years, GD's leverage has fluctuated but demonstrated an overall stability remaining below 0.3. This historical context indicates a conservatively managed capital structure. However, given the increase in leverage in the year-over-year comparison for 2023, this criterion would score 0 points in the Piotroski score, pointing to slightly worsened financial health when considering debt levels.

Current Ratio is growing?

The Current Ratio is a critical liquidity metric. It compares a company's current assets to its current liabilities, showcasing its ability to pay short-term obligations. A higher ratio signifies better liquidity.

Historical Current Ratio of General Dynamics (GD)

Comparing General Dynamics' current ratio from 2022 (1.373) to 2023 (1.4371), we observe an increase. This signifies an improvement in the company's liquidity position, adding 1 point to the Piotroski Score. Historically, GD's current ratio fluctuated, reaching peaks like 1.4668 in 2013 and lows such as 1.1385 in 2003. In comparison to the industry median, GD's 2023 current ratio of 1.4371 is below the median of 2.1805, suggesting room for liquidity improvement. Overall, the rising trend is favorable for GD.

Number of shares not diluted?

Change in shares outstanding measures how many shares a company has issued. A decrease is general considered favorable.

Historical outstanding shares of General Dynamics (GD)

For General Dynamics, the outstanding shares decreased from 275,300,000 in 2022 to 273,143,000 in 2023. This change translates to a reduction of 2,157,000 shares, indicating a repurchase or reduction of shares outstanding. Over the last 20 years, the trend displays a consistent decrease in outstanding shares, peaking at 402,934,000 in 2004 and reaching 273,143,000 by 2023. This continuous reduction signifies strong return of capital to shareholders through share repurchases, bolstering shareholder value and warranting the addition of 1 point.

Operating of General Dynamics (GD)

Cross Margin is growing?

Change in Gross Margin evaluates a company's ability to maintain profitability by comparing the most recent year's gross margin to the previous year. This metric indicates efficiency in managing production costs and pricing.

Historical gross margin of General Dynamics (GD)

In 2023, General Dynamics (GD) reported a Gross Margin of 0.1578, a decrease from 0.168 in 2022. This decline indicates that the company is facing greater production costs or pricing pressures, impacting its efficiency and profitability. Consequently, it detracts 1 point from the Piotroski Score as the gross margin has not improved. When comparing to the last 20 years of Gross Margin data, there's been some volatility, with historical peaks in 2013 and 2014 and a general downward trend since then. Compared to the industry median, GD's gross margin is consistently lower, underscoring potential cost management issues or pricing strategy weaknesses compared to peers. Despite this challenge, they remain within historical range but with evident room for improvement.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in utilizing its assets to generate sales revenue.

Historical asset turnover ratio of General Dynamics (GD)

The Asset Turnover ratio for General Dynamics increased from 0.7753 in 2022 to 0.7946 in 2023. This positive uptick indicates improved efficiency in asset use to drive sales. Historically, GD's Asset Turnover ratio has seen a downward trend from 1.1906 in 2003 to 0.7574 in 2020. However, the recent increase to 0.7946 is a step in the right direction, suggesting management efforts to enhance operational efficiency are yielding results. Therefore, for this year, the criterion scores 1 point for the Piotroski F-score.


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