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Last update on 2024-06-05

Hermes (HMI.F) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

In-depth Piotroski F-Score analysis of Hermes (HMI.F) for 2023 with a solid score of 7/9. Detailed evaluation of profitability, liquidity, and operating efficiency.

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 Hermes (HMI.F) 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?
1
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

Hermes has done a great job financially and operationally with a Piotroski F-Score of 7. They're making good profits, their cash flow is strong, and they efficiently manage their assets for earnings. Their leverage is minimal, meaning they don't rely heavily on debt, which is generally good. The company's current ratio shows they can easily handle their financial obligations. Their gross margin is growing, pointing to good pricing power and cost control. However, there's a little concern about share dilution because the number of shares increased recently, and their asset turnover ratio has decreased, showing they may be less efficient in using assets to generate sales compared to the past. Overall, the company looks solid, but you should keep an eye on certain areas mentioned.

Insights for Value Investors Seeking Stable Income

Hermes appears strong with a good Piotroski F-Score, but keep monitoring leverage and share dilution. Even with recent minor struggles in asset turnover and dilution, their strong profitability and cash flow position them well. It could be worth looking into more details and considering it for investment if further analysis aligns with your investing strategy.

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

Profitability of Hermes (HMI.F)

Company has a positive net income?

Net income measures a company's total earnings or profit, and positive net income indicates profitability.

Historical Net Income of Hermes (HMI.F)

The net income for Hermes (HMI.F) in 2023 is €4,311,000,000, which is notably positive. The consistent growth in net income over the last 20 years, from €220,700,000 in 2003 to €4,311,000,000 in 2023, highlights a robust upward trend. This indicates strong operational efficiency and profitability, earning Hermes a point for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects the amount of cash generated by a company's normal business operations. It is important to consider because it indicates the company's ability to generate sufficient cash flow to maintain and grow its operations without needing external financing.

Historical Operating Cash Flow of Hermes (HMI.F)

Hermes (HMI.F) reported a CFO of €4,328,000,000 in 2023, which is positive. This is an encouraging indicator of the company's financial health. Historically, Hermes has shown a consistent increase in its CFO over the past 20 years, progressing from €237,200,000 in 2003 to over €4 billion in 2023. Such a trend suggests robust operational performance over a long period. This upward trajectory highlights Hermes' capability to convert revenues into actual cash, ensuring liquidity and financial flexibility. Hence, Hermes earns 1 point for this criterion.

Return on Assets (ROA) are growing?

Change in ROA measures the company's ability to manage its assets to generate earnings year over year. An increase indicates improving efficiency and profitability, which is crucial for investors assessing financial health.

Historical change in Return on Assets (ROA) of Hermes (HMI.F)

The Return on Assets (ROA) for Hermes (HMI.F) increased from 0.2151 in 2022 to 0.2275 in 2023. This upward trend is positive and signifies that Hermes is becoming more efficient at utilizing its assets to generate earnings. When compared to the industry median ROA, which shows fluctuating but higher values, Hermes's performance, albeit lower, is improving. For example, the industry's median ROA was 0.688 in 2023, reflecting that while Hermes is moving in the right direction, there is still room for improvement to reach industry benchmarks. This gain warrants an additional point in the Piotroski Score analysis.

Operating Cashflow are higher than Netincome?

This criterion examines whether the operating cash flow surpasses net income to gauge a company's earnings quality.

Historical accruals of Hermes (HMI.F)

For 2023, Hermes reported an operating cash flow of €4,328 million, surpassing its net income of €4,311 million. This earns Hermes 1 point in the Piotroski Analysis. This trend is positive and indicative of strong cash earnings quality. Over the past 20 years, there is a consistent upward trajectory in both operating cash flow and net income. However, fluctuations must be observed, especially marked increases in accruals in past years such as 2021 leading to 2022, and a peak in operating cash flow in 2023, suggest the company has been generating substantial cash from its operations, often fluctuating more than net income. Such a pattern ensures capital strength and hints at less reliance on accrual accounting, fortifying investor confidence.

Liquidity of Hermes (HMI.F)

Leverage is declining?

Change in Leverage refers to the company's use of debt to finance its operations. A decreasing leverage ratio indicates reduced reliance on borrowed funds, which is generally a positive sign of financial health.

Historical leverage of Hermes (HMI.F)

Hermes (HMI.F) experienced an increase in leverage from 0.0953 in 2022 to 0.0866 in 2023. Historically, Hermes has maintained a very low leverage ratio, hovering around zero before spiking to 0.1326 in 2020. Though the trend appears to decrease since 2020, the leverage increase in 2023 spurs some caution. Despite maintaining low levels, increasing leverage means the company is taking on more debt, which could reason concerns depending on the intended use of this debt and associated risks. Continuous monitoring is needed to understand the larger financial strategy.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations or those due within one year.

Historical Current Ratio of Hermes (HMI.F)

Hermes (HMI.F) saw its current ratio rise from 3.9374 in 2022 to 4.4009 in 2023, an increase that results in the company earning 1 point for this criterion. This trend indicates improving liquidity as the higher ratio suggests that Hermes has a stronger short-term financial position. Historical data shows Hermes' current ratio has consistently been higher than the industry median. Such a trend not only reflects prudent cash management but also signals to investors that the company is less likely to face liquidity issues. For example, the current ratio increased from 3.6161 in 2020 to 3.9374 in 2022, maintaining a healthy spread above the industry median, which was 2.293 and 2.1789 respectively in those years.

Number of shares not diluted?

An increase in outstanding shares points towards potential equity dilution.

Historical outstanding shares of Hermes (HMI.F)

In comparison between 2022 and 2023, there has been an increase in outstanding shares from 104,564,729 to 104,661,326. This trend is seen as negative for current shareholders as it can indicate potential equity dilution. Over the long-term standpoint depicted over the last 20 years, there is a consistent slight fluctuation but with a general decrease until recently, highlighting overall control over dilution except in the latest year.

Operating of Hermes (HMI.F)

Cross Margin is growing?

The change in gross margin examines a company's ability to maintain or improve profitability and pricing power over time, which is crucial for assessing operational efficiency and competitiveness.

Historical gross margin of Hermes (HMI.F)

For Hermes (HMI.F), the gross margin has shown a positive trend, increasing from 0.7079 in 2022 to 0.7229 in 2023. This improvement suggests better pricing power and cost management. Over the last 20 years, Hermes has generally maintained a gross margin above the industry median, except in a few years. For instance, during the global financial crisis in 2008, Hermes outperformed the industry significantly. The recent uptick continues this long-term trend, ensuring Hermes positioned itself more competitively and operationally efficient than its peers.

Asset Turnover Ratio is growing?

Asset Turnover evaluates the efficiency of a company's use of its assets to generate sales. Higher ratios indicate better performance.

Historical asset turnover ratio of Hermes (HMI.F)

Comparing the Asset Turnover of 0.7085 in 2023 to 0.7412 in 2022, we see a decrease. Hence, no point is added for this criterion. Furthermore, the historical trend indicates a notable decline from a peak of 1.0472 in 2012 to 0.7085 in 2023, raising concerns about the efficiency of asset utilization.


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