IPGP 90.65 (+1.42%)
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Last update on 2024-06-06

IPG Photonics (IPGP) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

IPG Photonics (IPGP) achieves a robust Piotroski F-Score of 8/9 for 2023, indicating strong 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: 8

We're running IPG Photonics (IPGP) 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?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

IPG Photonics (IPGP) was assessed using the Piotroski F-Score, a tool to measure a company's financial strength, with a score range from 0 to 9. IPGP earned an impressive score of 8 out of 9, indicating a strong financial position. The analysis based on profitability, liquidity, and operating efficiency criteria include Positive Net Income in 2023 which doubled from 2022, significant positive Cash Flow from Operations, an increasing Return on Assets, and Operating Cash Flow exceeding Net Income. It also showed improved liquidity indicated by a growing Current Ratio despite a constant leverage. Additionally, the company successfully reduced its Outstanding Shares and enhanced its Gross Margin from the previous year. However, the Asset Turnover ratio, a measure of efficiency in using assets to generate revenue, saw a slight decline in 2023.

Insights for Value Investors Seeking Stable Income

Given IPG Photonics' high Piotroski F-Score of 8, mainly driven by strong profitability, increasing liquidity, efficient operating metrics, and sound financial practices, investing in IPGP could be valuable for investors looking for stable and financially robust stocks. However, it’s crucial to consider the slight decline in asset turnover and compare it with industry benchmarks and future growth prospects before making a final decision.

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

Profitability of IPG Photonics (IPGP)

Company has a positive net income?

Net income, or net earnings, is an essential measure of a company's profitability. It indicates how successfully a company can produce profit over a specific period.

Historical Net Income of IPG Photonics (IPGP)

The net income for IPG Photonics in 2023 is $218,878,000, which is positive. This marks a significant rebound from 2022's net income of $109,909,000. Therefore, according to the Piotroski F-Score, IPG Photonics scores 1 point for having positive net income. Historically, IPG Photonics has shown robust net income figures, peaking in 2017 at $347,614,000. Despite facing a dip in 2019 and 2020, the company has performed above par in recent years. This favorable net income trend bolsters investor confidence and suggests financial resilience.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's normal operations and is critical for assessing liquidity and financial health.

Historical Operating Cash Flow of IPG Photonics (IPGP)

In 2023, IPG Photonics (IPGP) reported a positive CFO of $295,986,000, which represents a significant increase from the $212,649,000 achieved in 2022. Over the past 20 years, the company's operational cash flows have consistently grown, aside from some fluctuations, reflecting robust operational efficiency. This metric having a positive value in 2023 is a strong indicator of liquidity and is crucial for sustaining operations without relying on external capital. Thus, for this criterion, IPG Photonics earns 1 point, which is favorable.

Return on Assets (ROA) are growing?

Change in ROA means comparing the return on assets (ROA) from recent fiscal years to determine whether a firm is improving in its asset profitability. ROA measures a company's ability to generate earnings from its assets, and an increasing ROA is a positive signal to investors and analysts.

Historical change in Return on Assets (ROA) of IPG Photonics (IPGP)

For IPG Photonics (IPGP), the ROA increased from 0.0372 in 2022 to 0.0804 in 2023. This increase indicates that the company has been more effective in utilizing its assets to generate profits, which is a good trend. Historically, IPGP’s ROA performance has been volatile but shows improvement in 2023. In comparative terms, the industry median ROA has been fairly high around the 0.40 range, which means IPG Photonics still has room for improvement against its peers.

Operating Cashflow are higher than Netincome?

Evaluating whether Operating Cash Flow exceeds Net Income provides insight into the quality of earnings and financial health of a company.

Historical accruals of IPG Photonics (IPGP)

For the fiscal year 2023, IPG Photonics (IPGP) reported an Operating Cash Flow of $295,986,000, significantly higher than its Net Income of $218,878,000. This discrepancy yields a positive assessment, contributing 1 point in the Piotroski analysis. High Operating Cash Flow relative to Net Income is indicative of robust earnings quality, suggesting that the company effectively converts income into cash, enhancing liquidity and financial stability. Over the last 20 years, IPG Photonics has seen an upward trend in both metrics, underscoring consistent operational performance.

Liquidity of IPG Photonics (IPGP)

Leverage is declining?

Leverage measures the degree to which a company is utilizing borrowed money. Lower leverage indicates reduced financial risk.

Historical leverage of IPG Photonics (IPGP)

In 2023, IPG Photonics reported leverage of 0.0051, which is a slight decrease from 0.0061 in 2022. This reduction in leverage is a positive sign, suggesting that the company is using less debt relative to its equity, thus lowering its financial risk. Historical data shows a consistent downward trend over the past two decades, reflecting the company's strong balance sheet management. Hence, according to the Piotroski Analysis criteria, IPG Photonics will not receive a point for leverage because the leverage has been constant.

Current Ratio is growing?

The Current Ratio, a liquidity metric, measures a company's ability to pay short-term obligations with its short-term assets. A higher ratio indicates better short-term financial health.

Historical Current Ratio of IPG Photonics (IPGP)

The Current Ratio of IPG Photonics (IPGP) has increased from 7.2321 in 2022 to 8.9111 in 2023, thereby adding 1 point in the Piotroski Analysis. This increase is significant and indicates improved liquidity and a stronger position in meeting short-term obligations. Looking at the historical data, IPGP's current ratio has consistently remained above the industry median, which was 3.161 in 2023. This trend suggests superior short-term financial health for the company over the last two decades. The consistent upward trend is commendable, indicating prudent financial management and a robust liquidity position. Over the 20-year span, the company's current ratio peaked at 10.0107 in 2020 and even its lowest figure (1.814 in 2004) was relatively close to industry performance for that period. This consistent performance is a positive sign for stakeholders.

Number of shares not diluted?

Change in outstanding shares reflects a company's equity structure changes which can affect share price and EPS.

Historical outstanding shares of IPG Photonics (IPGP)

The outstanding shares of IPG Photonics decreased from 50,761,096 in 2022 to 47,154,217 in 2023, which is a decline of approximately 7.1%. This reduction in outstanding shares is a positive indicator according to the Piotroski score, as it suggests effective buyback programs or other measures to return capital to shareholders. This trend is good as buybacks often signal that the company perceives its stock to be undervalued or as a measure to improve metrics such as EPS. Hence, IPG Photonics scores 1 point for this criterion.

Operating of IPG Photonics (IPGP)

Cross Margin is growing?

Gross Margin represents the proportion of revenue that exceeds the cost of goods sold, a critical measure of a company's profitability.

Historical gross margin of IPG Photonics (IPGP)

IPG Photonics has seen an improvement in its Gross Margin, rising from 0.3885 in 2022 to 0.4208 in 2023. This increase indicates better cost control and potentially enhanced pricing power or operational efficiencies. Historically, IPG's gross margin has exhibited volatility, peaking at 0.5656 in 2017 but falling to 0.3885 in 2022 before this recent upswing. Nonetheless, the company remains above the industry median of 0.4718 in 2023, suggesting a strong competitive position. Therefore, this criterion would earn 1 point under the Piotroski framework due to the improvement from the previous year.

Asset Turnover Ratio is growing?

Asset Turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue. It is calculated by dividing sales revenue by total assets.

Historical asset turnover ratio of IPG Photonics (IPGP)

The Asset Turnover ratio for IPG Photonics (IPGP) decreased from 0.4835 in 2022 to 0.4731 in 2023, indicating a slight decline in its efficiency in using assets to generate revenue. Therefore, no point is added for the criterion of Asset Turnover as the ratio did not increase in 2023. The historical data over the past 20 years show fluctuations, with the highest Asset Turnover in 2004 at 1.0983 and the lowest in recent years.


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