IFF 98.91 (+0.78%)
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Last update on 2024-06-05

International Flavors & Fragrances (IFF) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Analyze International Flavors & Fragrances (IFF) using Piotroski F-Score. 2023 score: 4/9, indicating areas of financial improvement needed.

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: 4

We're running International Flavors & Fragrances (IFF) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
0
Company has a positive cash flow?
1
Return on Assets (ROA) are growing?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

International Flavors & Fragrances (IFF) has a Piotroski F-Score of 4. Its positives include a strong cash flow from operations and an improved asset turnover. However, the IFF shows several concerning aspects such as negative net income for two consecutive years, declining return on assets (ROA), increasing leverage, a decreasing current ratio, and a falling gross margin. The stable number of shares might be a small consolation, but overall, IFF faces significant financial and operational challenges.

Insights for Value Investors Seeking Stable Income

Based on this analysis, International Flavors & Fragrances (IFF) might not be a strong buy at this time. With its low Piotroski F-Score and several critical financial issues such as negative net income and increasing leverage, potential investors might want to wait for signs of a more stable and positive financial turnaround before considering investing in IFF. It would be prudent to monitor the company's financial health and look for improvements in profitability, liquidity, and operational efficiency.

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

Profitability of International Flavors & Fragrances (IFF)

Company has a positive net income?

Net income measures a company's profitability and reflects the company's earnings after all expenses have been deducted from revenue.

Historical Net Income of International Flavors & Fragrances (IFF)

The net income for International Flavors & Fragrances (IFF) in 2023 is -$2,565,000,000, representing a negative trend. This is a substantial dip compared to previous years, indicating that the company is facing significant profitability challenges. Looking at the last 20 years, this is the second consecutive year of negative net income, following -$1,868,000,000 in 2022. In contrast, from 2003 to 2021, the company consistently reported positive net incomes, peaking at $455,873,000 in 2019. This negative turnaround suggests potential underlying issues in the company's operations, market conditions, or structural challenges that need addressing to restore profitability. As the net income is negative for 2023, this criterion scores 0 points.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is the amount of cash generated by a company's normal business operations.

Historical Operating Cash Flow of International Flavors & Fragrances (IFF)

International Flavors & Fragrances (IFF) has a positive CFO of $1,439,000,000 in 2023. This is a healthy indicator, as positive operating cash flow is critical for a company's long-term sustainability and helps in meeting its liabilities and future growth prospects. Looking at the historical data for the last 20 years, the trend shows fluctuations but is primarily increasing over this period, with a notable spike in 2021 and another increase in 2023. Specifically, the cash flow from operations grew significantly from $714,000,000 in 2020 to $1,437,000,000 in 2021, indicating a strong operational performance. Therefore, this trend is favorable compared to previous years, reflecting consistency and growth in ongoing business activities.

Return on Assets (ROA) are growing?

Change in ROA measures the profitability of a company relative to its total assets and helps assess efficiency.

Historical change in Return on Assets (ROA) of International Flavors & Fragrances (IFF)

In 2023, International Flavors & Fragrances (IFF) recorded an ROA of -0.0771, compared to -0.0497 in 2022. This decline indicates a deterioration in asset efficiency and profitability. Therefore, IFF scores 0 points for this criterion. Additionally, over the past 20 years, IFF's ROA shows significant fluctuation, with industry medians consistently positive at around 30%. This comparison further underscores the company's challenge in achieving asset profitability.

Operating Cashflow are higher than Netincome?

The relationship between Operating Cash Flow and Net Income is a critical metric in the Piotroski Analysis. Higher Operating Cash Flow than Net Income often indicates higher quality of earnings, suggesting that the company's income is supported by cash operations rather than accounting adjustments.

Historical accruals of International Flavors & Fragrances (IFF)

In 2023, International Flavors & Fragrances (IFF) reported an Operating Cash Flow (OCF) of $1.439 billion, significantly higher than its Net Income, which stood at a loss of $2.565 billion. This trend is favorable as it signals robust cash generation despite the firm posting a net loss. The OCF/Net Income ratio of -0.56 underlines that the company's cash-generating ability is currently disconnected from its net profitability, likely due to non-cash charges or one-time expenses reflected on their income statement. Analyzing the past 20 years, this is a noteworthy instance as OCF surpassed net income only sporadically. Additionally, the majority of historical data shows positive net incomes, implying that the company's present struggles might be attributable to unique, transitory issues rather than chronic operational inefficiencies. Thus, adding 1 point for this criterion is justified.

Liquidity of International Flavors & Fragrances (IFF)

Leverage is declining?

Change in Leverage is a crucial criteria in Piotroski's model. It helps to monitor a company's ability to manage its debt levels relative to its total assets, indicating financial stability.

Historical leverage of International Flavors & Fragrances (IFF)

The Leverage has increased from 0.3109 in 2022 to 0.3173 in 2023. Therefore, this criterion receives 0 points. With an increase in leverage, International Flavors & Fragrances (IFF) seems to be taking on more debt relative to its assets, which might be worrisome for investors. Over the last 20 years, IFF has generally maintained a moderate leverage ratio, with fluctuations between 0.0498 in 2005 and a peak of 0.4195 in 2008. This trend shows some volatility in debt management, although the recent increase is marginal, it contradicts the aim of reducing debt.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term liabilities with its short-term assets. A higher ratio indicates better liquidity.

Historical Current Ratio of International Flavors & Fragrances (IFF)

Comparing the Current Ratio of International Flavors & Fragrances (IFF) from 1.9936 in 2022 to 1.6746 in 2023, the ratio has decreased. Therefore, in this specific Piotroski Analysis criterion, IFF scores 0 points as the ratio did not increase. Historically, the company's Current Ratio has varied, with significant fluctuations, such as a peak of 3.2961 in 2014 and a low of 0.9905 in 2005, often remaining above the industry median. The industry's median for 2023 is 1.9399, making IFF's liquidity slightly below average for its industry. This decrease suggests reduced short-term financial strength, which could raise concerns about the company’s ability to cover its short-term obligations efficiently.

Number of shares not diluted?

Change in shares outstanding refers to the alteration in the total number of shares issued by a company. This is crucial as it can impact shareholder value, earnings per share (EPS), and the ownership percentage of existing shareholders.

Historical outstanding shares of International Flavors & Fragrances (IFF)

The outstanding shares for International Flavors & Fragrances (IFF) have remained constant at 255,000,000 from 2022 to 2023. Hence, there is no increase or decrease in the number of outstanding shares, and the score for this criterion remains at 0. Historically, IFF's shares have shown an upward trend, particularly from 2019 onwards, where there was a substantial increase from 112,000,000 in 2019 to 255,000,000 in 2022. This trend can imply dilution for existing shareholders and should be closely monitored.

Operating of International Flavors & Fragrances (IFF)

Cross Margin is growing?

The criterion requires evaluation of the gross margin, an important measure of profitability, by comparing the most recent year to the previous year. An increase in gross margin signals improved efficiency or pricing power.

Historical gross margin of International Flavors & Fragrances (IFF)

For International Flavors & Fragrances (IFF), the gross margin in 2023 is 0.3207, which has decreased slightly from 0.3337 in 2022. Therefore, they score 0 points for this criterion. Evaluating the trend over the past two decades, IFF's gross margin shows a notable decline, especially compared to its peak in previous years, such as 2003 at 0.4255. Although the 2023 gross margin is still above the industry median of 0.3018, the downward trend highlights potential challenges in maintaining profitability amidst growing competitive pressures.

Asset Turnover Ratio is growing?

Asset Turnover is a ratio that measures the efficiency of a company's use of its assets in generating sales revenue.

Historical asset turnover ratio of International Flavors & Fragrances (IFF)

International Flavors & Fragrances (IFF) has experienced an increase in its Asset Turnover from 0.3309 in 2022 to 0.3452 in 2023. This increase indicates that the company has improved its ability to generate sales from its asset base. While the growth might appear modest, its aligned positive trend is essential, especially given the observed decline in the Asset Turnover ratio over the past decade. Historically, IFF's Asset Turnover was much higher, surpassing 0.8 before 2015. The past 20 years' data shows a general downtrend with peaks observed in 2011 at 0.9551. The recent improvement may signal an initial phase of recovery or optimization within the company's operational efficiency. This achievement earns a score of 1 under the Piotroski analysis framework.


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