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Last update on 2024-06-06

Howmet Aerospace (HWM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Discover Howmet Aerospace's (HWM) Piotroski F-Score of 8/9 for 2023, highlighting their financial strength and investment potential through comprehensive analysis.

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 Howmet Aerospace (HWM) 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?
0
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score for Howmet Aerospace (HWM) is 8, indicating a strong financial position. The score suggests good profitability, effective cash flow management, and improving leverage. The company's net income and cash flow from operations are positive and growing, indicating healthy operational performance. The return on assets (ROA) and gross margin have improved, reflecting better operational efficiency. HWM also reduced its number of outstanding shares, indicating potential stock repurchase. However, the company’s current ratio has decreased, suggesting potential short-term liquidity concerns.

Insights for Value Investors Seeking Stable Income

With an impressive Piotroski F-Score of 8, Howmet Aerospace appears to be a strong candidate for investment. The positive trends in profitability, revenue generation, and reduced debt are all encouraging signs. Potential investors may want to closely monitor the company's liquidity but overall, HWM seems to be a promising stock worth considering.

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

Profitability of Howmet Aerospace (HWM)

Company has a positive net income?

Net income refers to the total profit of a company, calculated after all expenses and taxes have been subtracted from total revenue. It reflects the company's ability to generate earnings.

Historical Net Income of Howmet Aerospace (HWM)

For Howmet Aerospace (HWM), the net income for 2023 is indeed positive, amounting to $765 million. This positive net income adds 1 point in the Piotroski analysis. Historically, the company has had fluctuating net income over the past 20 years, with notable losses during financial crises or due to extraordinary expenses. For instance, in 2008 and 2013, Howmet recorded net losses of $924 million and $2.244 billion respectively, marked by global economic downturns and internal restructuring efforts. However, the positive trend in the recent years, especially the net income improving from $469 million in 2022 to $765 million in 2023, indicates a strengthening performance and resilience, making it a favorable sign for the company’s financial health.

Company has a positive cash flow?

Examining the cash flow from operations (CFO) involves evaluating the total cash generated from core business activities.

Historical Operating Cash Flow of Howmet Aerospace (HWM)

For 2023, Howmet Aerospace's CFO stands at $901 million, marking a positive figure. Over the past two decades, the company had varying CFO results, from a sharp drop to $9 million in 2020, possibly due to external disruptions, to a recent uptrend with $901 million in 2023. This trend of positive cash flow indicates a healthy operational performance, earning the full point for the CFO criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is evaluated by comparing the current year's ROA with the previous year's ROA. It is important as it measures a company's profitability relative to its total assets.

Historical change in Return on Assets (ROA) of Howmet Aerospace (HWM)

Howmet Aerospace (HWM) saw an increase in its ROA from 0.0458 in 2022 to 0.074 in 2023. This improvement adds 1 point in the Piotroski Score, indicating a positive trend in asset utilization efficiency. Over a 20-year span, HWM has generally trailed the industry median, which underscores the significance of this positive shift. The industry median ROA has ranged from 0.3154 to 0.3556, with 2023 standing at 0.3492. Even though HWM's ROA still lags behind, the observed gain points towards a progressive stride in enhancing operational performance.

Operating Cashflow are higher than Netincome?

This criterion examines whether the company's operating cash flow is higher than its net income.

Historical accruals of Howmet Aerospace (HWM)

For 2023, Howmet Aerospace (HWM) recorded an operating cash flow of $901 million compared to a net income of $765 million. This yields a positive result, signifying a robust operating cash flow and strong earnings quality. Operating cash flow being higher than net income suggests effective revenue collection and efficient cash management. Companies achieving this can often better sustain day-to-day operations and reinvest in growth opportunities. HWM consistently shows higher operating cash flows over several years, implying a trend of generating sufficient cash organically and maintaining operational health. This is a good indicator for long-term sustainability.

Liquidity of Howmet Aerospace (HWM)

Leverage is declining?

Assessing changes in leverage, which is the ratio of a company's total debt to its total equity, helps understand the financial structure and risk.

Historical leverage of Howmet Aerospace (HWM)

Examining the data, the leverage metric for Howmet Aerospace (HWM) stood at 0.4139 in 2022, then saw a decrease to 0.3449 in 2023. This decline in leverage signifies a 0.069 reduction, illustrating a motion towards a stronger equity position and lower reliance on debt—a positive trend. Over the last 20 years, leverage figures have fluctuated, reaching peaks in 2020 (0.4194) and maintaining a high until 2022, indicating prudent financial management in 2023. Consequently, we assign a score of 1 point for this positive leverage change.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with its short-term assets. It is important because it provides insights into the liquidity and financial health of a company.

Historical Current Ratio of Howmet Aerospace (HWM)

In 2022, Howmet Aerospace had a Current Ratio of 2.1208, which decreased to 1.8587 in 2023. This represents a decline, thus no point is awarded for this criterion (0 points). When viewed in the context of its industry, where the median Current Ratio hovered around 1.7757 in 2023, Howmet's ratio is still above the industry median but is declining towards it. Historically, Howmet's Current Ratio has fluctuated, peaking at around 2.2585 in 2017, indicating that the company's liquidity position has room for improvement.

Number of shares not diluted?

Change in shares outstanding reflects how the company is financing its operations and its impact on shareholder value.

Historical outstanding shares of Howmet Aerospace (HWM)

In 2022, Howmet Aerospace had 416 million outstanding shares, which decreased to 412 million shares in 2023. This indicates a reduction in the number of outstanding shares by 4 million over the year. Typically, a decrease in outstanding shares is viewed positively as it suggests the company may be repurchasing its stock, which could signal management's confidence in the company's future prospects and can potentially increase the value per share. Thus, Howmet Aerospace earns 1 point for this criterion. Over the past 20 years, the trend shows a significant peak in outstanding shares during 2010-2011, but the numbers have generally seen a downward trajectory since, reflecting potential buybacks and restructuring initiatives.

Operating of Howmet Aerospace (HWM)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold and is a key indicator of a company's financial health and operational efficiency.

Historical gross margin of Howmet Aerospace (HWM)

In 2023, Howmet Aerospace (HWM) reported a Gross Margin of 0.2812, compared to 0.2755 in 2022. This represents an increase, indicating an improvement in the company's operational efficiency. Over the last 20 years, Gross Margin has shown significant volatility, with a low point in 2012 at -0.8644 and a gradual improvement to the present. However, it's still below the industry median of 0.3492 for 2023. Overall, this trend in Gross Margin is good, earning a score of 1 on the Piotroski Scale.

Asset Turnover Ratio is growing?

Asset Turnover Ratio measures the efficiency with which a company uses its assets to generate sales. Higher ratios indicate better performance.

Historical asset turnover ratio of Howmet Aerospace (HWM)

The Asset Turnover Ratio for Howmet Aerospace (HWM) increased from 0.5532 in 2022 to 0.6421 in 2023. This increment signifies a more efficient use of assets, reflecting an improvement in converting investments in assets into revenue. In historical context, the 2023 ratio shows a rebound compared to prior periods, e.g., 0.6284 in 2011, and reflects a positive trend after a dip in 2021 (0.4591). Therefore, for 2023, 1 point is added based on asset turnover improvement.


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