IR 100.34 (+1.7%)
US45687V1061Industrial ProductsSpecialty Industrial Machinery

Last update on 2024-06-05

Ingersoll Rand (IR) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Analyze Ingersoll Rand's financial health using the 2023 Piotroski F-Score. With a solid 8/9 score, uncover insights on IR's profitability, liquidity, and 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: 8

We're running Ingersoll Rand (IR) 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

Ingersoll Rand (IR) scores an 8 out of 9 on the Piotroski F-Score, indicating a strong financial position. The company shows positive net income, cash flow, rising ROA, and operating cash flow exceeding net income. Leverage rose slightly, but the current ratio and shares outstanding show favorable trends, though not all criteria were met (like decreasing leverage and current ratio increase). Additionally, IR has grown gross margins and asset turnover, demonstrating strong efficiency and operational performance.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski score of 8, Ingersoll Rand (IR) presents as a strong and potentially undervalued investment opportunity. The company demonstrates solid profitability, efficient cash flow management, and operational effectiveness. Investors should consider looking into this stock further, keeping in mind the company's recent trends and overall financial health.

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

Profitability of Ingersoll Rand (IR)

Company has a positive net income?

The Net Income criterion checks if a company's net income is positive in the given year. A positive net income is crucial as it indicates profitability and a successful business operation.

Historical Net Income of Ingersoll Rand (IR)

For 2023, Ingersoll Rand's net income stands at $778.7 million, which is unequivocally positive. Given that a positive net income reflects profitability and signals healthy financial performance, we can assign 1 point based on this criterion. Looking at the historical data over the past 20 years, IR has had fluctuations with periods of both positive and negative net incomes, including challenging years such as 2013 and 2014 with net incomes of -$135.0 million and -$351.2 million respectively. However, the recent trend appears favorable, with IR displaying a consistent improvement in net income over the last three years (2019-2023). This positive trajectory further strengthens the argument for awarding 1 point for 2023. Therefore, Ingersoll Rand scores 1 point for the positive net income indicator.

Company has a positive cash flow?

Cash Flow from Operations (CFO) refers to the total amount of money generated by a company from its core business activities.

Historical Operating Cash Flow of Ingersoll Rand (IR)

Ingersoll Rand (IR) has a CFO of $1.377 billion in 2023, marking a significant upward trend compared to the previous year’s CFO of $860.3 million. This positive trend not only implies a robust ability to generate cash from its core operations but also grants 1 point in the Piotroski analysis. It indicates financial health and operational efficiency, crucial for a firm’s sustainability and for meeting its short-term liabilities.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's efficiency in generating profit from its assets. A rising ROA is a positive indication of improved financial performance.

Historical change in Return on Assets (ROA) of Ingersoll Rand (IR)

Ingersoll Rand (IR) showed an increase in ROA from 0.0404 in 2022 to 0.0513 in 2023. This marks a positive trend, adding 1 point to the Piotroski score. The long-term industry median ROA has fluctuated but remains significantly higher, suggesting room for further improvement. This increase, though modest, is a good sign for investors, demonstrating improved profitability and efficiency.

Operating Cashflow are higher than Netincome?

Operating cash flow (OCF) represents the amount of cash a company generates from its regular business operations. It is crucial to compare OCF with net income to assess the quality of earnings.

Historical accruals of Ingersoll Rand (IR)

For Ingersoll Rand (IR) in 2023, the operating cash flow is $1,377,400,000, whereas the net income is $778,700,000. Since the OCF exceeds the net income, it reflects strong earnings quality and suggests that the company can translate its earnings into actual cash. This trend is positive and adds 1 point to the Piotroski score. The historical data further supports this as the OCF has frequently been higher than net income in many years, confirming consistent operational efficiency.

Liquidity of Ingersoll Rand (IR)

Leverage is declining?

Change in Leverage compares the year-over-year change in the company's leverage ratio, which is the ratio of total debt to total assets.

Historical leverage of Ingersoll Rand (IR)

Ingersoll Rand's (IR) leverage ratio has increased from 0.1839 in 2022 to 0.173 in 2023. Therefore, 1 point will not be added according to Piotroski's criteria. Examining the historic data over the last 20 years, we see fluctuations in leverage with significant increases in years such as 2015 (0.837) and 2016 (0.8595). However, a general decreasing trend in recent years is notable, falling from 0.3465 in 2019 to 0.1839 in 2022. Despite the increase in 2023, maintaining leverage at lower historical levels is a positive sign for financial health.

Current Ratio is growing?

The Current Ratio assesses a company's ability to pay short-term obligations with its short-term assets.

Historical Current Ratio of Ingersoll Rand (IR)

Comparing the Current Ratio of 2.2166 in 2023 with 2.37 in 2022 indicates a decline, marking it notably below the prior year. Historically, Ingersoll Rand's Current Ratio has fluctuated but generally remained above the industry median, which was 1.7757 in 2023. Despite the decrease, IR’s Current Ratio is still comfortably above the industry standard, reflecting decent short-term financial health. No point is awarded here because the ratio decreased.

Number of shares not diluted?

Change in shares outstanding is vital because it influences earnings per share (EPS) and control dynamics, affecting investor decisions.

Historical outstanding shares of Ingersoll Rand (IR)

Upon comparing the outstanding shares from 2022 (405,300,000) to 2023 (404,800,000), the shares outstanding have decreased slightly in 2023. This is a good sign as it implies less dilution, leading to higher Earnings Per Share (EPS) and potentially greater return on equity for investors. Consequently, Ingersoll Rand earns 1 point for this criterion. Historically, the outstanding shares peaked at 438,277,100 in 2003 and have shown substantial fluctuations with a notable downward trend over the last decade, reflecting management's possible focus on returning value to shareholders using share repurchases.

Operating of Ingersoll Rand (IR)

Cross Margin is growing?

This criterion compares the gross margin of the firm year over year. An increase in gross margin indicates better efficiency in production or business operations, leading to increased profitability. It is important as it highlights how well a company controls its production costs relative to its revenue.

Historical gross margin of Ingersoll Rand (IR)

Comparing the gross margins of Ingersoll Rand (IR) in 2022 and 2023, it is evident that the gross margin has increased from 0.3931 in 2022 to 0.4192 in 2023. This increase signals improved efficiency in production or reduced costs of goods sold, resulting in higher profitability. Given this positive trend, a point is added in the Piotroski score for this criterion. Historically, IR's gross margin shows an overall upward trend over the last 20 years, consistently outperforming the industry median gross margin, which stood at 0.3492 in 2023 compared to IR's 0.4192. Such performance underscores the company's competitive advantage in cost management and operational efficiency.

Asset Turnover Ratio is growing?

Asset Turnover measures a firm's efficiency in utilizing its assets to generate sales.

Historical asset turnover ratio of Ingersoll Rand (IR)

Ingersoll Rand (IR)'s Asset Turnover ratio has increased from 0.3955 in 2022 to 0.4534 in 2023. This indicates a positive trend as the firm is now more effective in utilizing its assets to generate revenue. The increase gives it 1 point in the Piotroski analysis. Historically, the company had higher ratios in the early 2000s, reaching a peak of 0.9547 in 2006. The current trend towards improvement can be seen as a positive sign, though it remains below past peak levels.


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