Last update on 2024-06-05

Generac Holdings (GNRC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Detailed 2023 Piotroski F-Score analysis for Generac Holdings (GNRC) with a score of 6/9. Discover the financial health based on profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 6

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

Generac Holdings (GNRC) has scored 6 out of 9 on the Piotroski F-Score, indicating a reasonably strong financial position. The company shows positive trends in net income, operating cash flow, current ratio, and gross margin. However, it needs improvement in leverage reduction, return on assets, and asset turnover ratio, which have shown unfavorable trends.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 6, Generac Holdings (GNRC) shows several positive indicators that highlight its operational efficiency and profitability. However, investors should be cautious about its increasing leverage and decreasing asset efficiency. This stock could be of interest to investors, especially if they believe the company can address these issues and improve its financial metrics. It's worth keeping an eye on.

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

Profitability of Generac Holdings (GNRC)

Company has a positive net income?

Net income assesses whether the company is profitable, a critical factor for evaluating its financial health.

Generac Holdings (GNRC) posted a net income of $203,089,000 in 2023, indicating a positive trend. This marks the 14th positive year out of the last 17. Despite the fluctuations, positive net income generally signals strong financial performance. Therefore, Generac adds 1 point for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the amount of cash generated by a company's regular business operations. A positive CFO is crucial as it signifies a company's ability to generate sufficient cash flow to maintain and grow its operations, pay dividends, and meet its financial obligations without external financing.

Generac Holdings (GNRC) reported a positive CFO of $521.67 million in 2023. This is a strong indication of solid operational performance. Over the last 17 years, Generac's CFO has shown a generally upward trend with occasional fluctuations, peaking at $585.16 million in 2022 before a decline to the 2023 figure. The positive CFO suggests that the company is generating enough cash from its core business activities to cover operating costs and reinvest in the business. This trend is favourable, signaling financial stability and operational efficiency. Therefore, Generac earns 1 point for this criterion.

Return on Assets (ROA) are growing?

Change in ROA, which stands for Return on Assets, evaluates how profitable a company is relative to its total assets. This metric is crucial for understanding the efficiency with which a company is deploying its assets to generate earnings.

For Generac Holdings (GNRC), the ROA decreased from 0.0697 in 2022 to 0.0396 in 2023. This results in a score of 0 for this criterion as the decreasing trend in ROA indicates a reduction in profitability relative to the assets used. Historically, the last 20 years reveal significant fluctuations, for instance, the highest being around 0.0697 in 2022. Compared to the industry median ROA, GNRC's latest ROA of 0.0396 is substantially below the industry median of 0.3492 for the same year, indicating underperformance.

Operating Cashflow are higher than Netincome?

Operating cash flow should surpass net income to indicate efficient and healthy cash generation

In 2023, Generac Holdings (GNRC) demonstrates a robust operational performance. With an operating cash flow of $521.67 million, significantly exceeding its net income of $203.09 million, GNRC ensures smooth internal financing and reinforces its liquidity position. An operating cash flow higher than net income, as observed in GNRC, is essential as it shows the company can convert its income into cash effectively, which is a crucial indicator of corporate health. This metric has earned GNRC a 1 point in Piotroski F-Score for 2023. Moreover, this trend aligns well with its historical data, marking a consistent strength in cash flow generation.

Liquidity of Generac Holdings (GNRC)

Leverage is declining?

Change in Leverage refers to the variation in the ratio of a company's debt to its equity.

In 2023, Generac Holdings' leverage stood at 0.3153, up from 0.2976 in 2022. This levers increase indicates a rise in the company's debt relative to its equity. Reviewing the last 20 years, leverage peaked in 2008 at 0.8456 and then showed a general decline until 2021 when it was at 0.255. The increased leverage in 2023 may indicate the company took on new debt. Given this, no point is awarded as leverage has increased.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets and is important for understanding the company's financial health.

Generac Holdings (GNRC) improved its current ratio from 2.1999 in 2022 to 2.2681 in 2023, indicating an increase. Hence, the score for this criterion is 1 point. An increasing current ratio could indicate better liquidity, although GNRC's current ratio has fluctuated over the years, peaking in 2010 at 3.1438 and hitting a low in 2015 at 1.9989. Compared to the industry median, which was 1.7757 in 2023, GNRC's current ratio is significantly higher, suggesting stronger short-term financial health. This trend is positive, although the ratio dropped in previous years before climbing back up, signaling some volatility in liquidity.

Number of shares not diluted?

This metric evaluates whether a company has been diluting its shares, which may affect shareholder value.

In 2023, Generac Holdings' outstanding shares were 61,265,060 compared to 63,117,007 in 2022. This represents a decrease in outstanding shares, which is generally positive for existing shareholders because it signifies less dilution of shares. Per the last two decades of data from Generac Holdings, shares were historically higher, notably peaking at over 67 million in the early 2010s. Hence, the 2023 reduction marks a potential strategic focus on maintaining or enhancing shareholder value. As such, for the Piotroski analysis, Generac Holdings earns a point for this criterion.

Operating of Generac Holdings (GNRC)

Cross Margin is growing?

The gross margin analysis is a critical measure of a company's trading profitability. Gross margin is calculated by subtracting the cost of goods sold from revenue and dividing the result by revenue. This ratio indicates how efficiently a company is producing and selling its goods.

Generac Holdings' (GNRC) gross margin increased from 0.3334 in 2022 to 0.3394 in 2023, marking an improvement. This increase of approximately 0.6 percentage points is a positive indicator for the company, hinting at better cost management, pricing power, or operational efficiency. Over the last 20 years, the gross margin has fluctuated, hitting a high of 0.4009 in 2009 and a low of 0.3334 in 2022. Despite this increase, Generac's gross margin of 0.3394 in 2023 still lags slightly behind the industry median of 0.3492. Although Gross Margin has improved, prompting a +1 score in Piotroski analysis, there is room for further improvement to surpass industry standards.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. A higher ratio indicates better performance.

Comparing the asset turnover ratios of Generac Holdings in 2022 and 2023, there is a noticeable decrease from 0.9087 to 0.7839. This trend is unfavorable as it signifies less efficiency in generating sales from its asset base within these years. Historically, the highest asset turnover ratio over the last 20 years was 0.9213 in 2021, showing a marked decline since then. Therefore, no point is awarded.