KO 64.27 (+1.36%)
US1912161007Beverages - Non-AlcoholicBeverages - Non-Alcoholic

Last update on 2024-06-04

Coca-Cola (KO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Analyze Coca-Cola's financial health in 2023 with a deep dive into its Piotroski F-Score of 8/9, revealing strong profitability, liquidity, and operational 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 Coca-Cola (KO) 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 analysis of Coca-Cola (KO) using the Piotroski F-Score model reveals a strong financial position with an 8 out of 9 score. The company displays solid profitability, with a positive net income of $10.714 billion and operating cash flow of $11.599 billion in 2023, reflecting efficient operations. The Return on Assets (ROA) also grew, indicating improved asset utilization. Coca-Cola maintains robust cash flow surpassing net income, signaling high earnings quality. Despite a slight increase in financial leverage and a decrease in current ratio, the company shows strong liquidity through effective cash management. Additionally, the reduction in outstanding shares and an increasing asset turnover ratio further highlight the company's operational efficiency and market confidence. Overall, Coca-Cola shows financial resilience and potential for long-term growth.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, investing in Coca-Cola (KO) appears to be a good opportunity due to its strong financials and operational efficiency. While there are slight concerns with increased leverage and current ratio, the overall positive performance in profitability, liquidity, and operational criteria reflects the company's resilience and capacity for sustained growth. Potential investors should consider this stock but also stay mindful of the leverage and liquidity aspects to ensure comprehensive risk assessment.

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

Profitability of Coca-Cola (KO)

Company has a positive net income?

The criterion checks whether the company's net income is positive. A positive net income indicates profitability and is crucial for the company's financial health.

Historical Net Income of Coca-Cola (KO)

For 2023, Coca-Cola reported a net income of $10,714,000,000, which is undeniably positive. This metric indicates strong profitability for the year 2023 and adds 1 point to Coca-Cola's Piotroski Score. Historically, the company has shown a trend of positive net income, except for the anomaly in 2017 where it reported a net loss. However, the company's ability to bounce back from that loss to its current profitable state also speaks volumes about its resilience and market position. Thus, for 2023, Coca-Cola gets a point in the Piotroski Score for this criterion, reflecting a healthy financial performance.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the cash a company generates from its regular operating activities. Positive CFO signifies robust financial health and operational efficiency.

Historical Operating Cash Flow of Coca-Cola (KO)

For 2023, Coca-Cola's CFO stands at $11.599 billion, a positive figure. This not only adds 1 point to the Piotroski score but also underlines the company's operational strength. Historically, Coca-Cola has consistently maintained a positive cash flow from operations over the past 20 years, with a noticeable rise from $5.456 billion in 2003 to the current $11.599 billion. This continuous growth reflects solid and improving operational performance, a key indicator of financial stability and robust cash management.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures a company's efficiency in using its assets to generate profits from one period to the next and indicates operational effectiveness.

Historical change in Return on Assets (ROA) of Coca-Cola (KO)

Coca-Cola's ROA increased from 0.102 in 2022 to 0.1125 in 2023, which adds 1 point to our Piotroski score. This is a positive development reflective of improved operational efficiency. Historically, over the last 20 years, the company's ROA has shown a consistent and robust performance, and the steady increase in Operating Cash Flow supports this growth. Comparatively, although the industry’s median ROA is generally higher, Coca-Cola’s increasing ROA showcases its strong competitive edge and indicates that the company is becoming more effective in utilizing its assets.

Operating Cashflow are higher than Netincome?

This criterion measures the relationship between Operating Cash Flow (OCF) and Net Income. It evaluates whether a company's cash generation supports its reported profits, which is vital for assessing earnings quality and financial health.

Historical accruals of Coca-Cola (KO)

For the year 2023, Coca-Cola reported an Operating Cash Flow (OCF) of $11.599 billion and a Net Income of $10.714 billion. As the OCF exceeds the Net Income, we award one point for this criterion. This trend signals that Coca-Cola is effectively converting its income into cash, which is a positive indicator of financial health. Over the past 20 years, Coca-Cola has shown an increasing tendency of robust OCF, consistently surpassing Net Income post-2018, underscoring a strong earnings quality. Analyzing the data, 2023 marks one of the highest OCF figures, indicative of solid operational performance healthy for sustaining dividends and growth investments.

Liquidity of Coca-Cola (KO)

Leverage is declining?

The change in leverage examines whether a company's financial leverage has increased or decreased over the given period. This is important as it affects the firm's financial risk profile.

Historical leverage of Coca-Cola (KO)

In comparing the leverage ratios of Coca-Cola (KO) from 2022 to 2023, we see an increase from 0.3921 to 0.3638. This indicates that the company has taken on more debt relative to its equity (higher financial leverage). Historically, over the last 20 years, leverage seems to have peaked at 0.6273 in 2003 and has exhibited variability since. The current upward trend in leverage is not favorable, as higher leverage might increase the financial risk for investors.

Current Ratio is growing?

Current Ratio measures a company's ability to pay short-term obligations with short-term assets. A higher current ratio is preferable as it indicates a better liquidity position.

Historical Current Ratio of Coca-Cola (KO)

Coca-Cola's Current Ratio was 1.1341 in 2023, compared to 1.1454 in 2022. This represents a decrease, suggesting a slightly weakened liquidity position relative to the previous year. As the ratio has decreased, no point is added to the Piotroski score for this criteria. It's noteworthy that Coca-Cola's current ratio has shown significant fluctuation over the past 20 years, often sitting below industry median except in years 2004, 2005, 2010, 2015, 2016, and 2018. Specifically, 2023's ratio (1.1341) is markedly lower than the industry median current ratio of 1.417, which further emphasizes liquidity concerns.

Number of shares not diluted?

Change in shares outstanding refers to the difference in the number of publicly traded shares of a company over a specific time period.

Historical outstanding shares of Coca-Cola (KO)

Between 2022 and 2023, Coca-Cola's outstanding shares decreased from 4,328,000,000 to 4,323,000,000. This reduction indicates a buyback of shares by the company, which can be a positive signal for investors as it might lead to an increase in earnings per share (EPS) and often signifies management's confidence in the company's future. Historically, Coca-Cola's outstanding shares count peaked in 2003 at 4,924,000,000 and has gradually decreased over the years. Given the criterion, a decrease in outstanding shares in 2023 adds 1 point.

Operating of Coca-Cola (KO)

Cross Margin is growing?

Changes in Gross Margin indicate the profitability of a company. An increasing Gross Margin suggests better cost management and pricing power.

Historical gross margin of Coca-Cola (KO)

The Gross Margin for Coca-Cola (KO) has increased from 0.5814 in 2022 to 0.5952 in 2023. This represents an uptick, which can be seen as a positive sign for the company's potential profitability. The increase adds 1 point to the Piotroski Score for Coca-Cola. Additional data over the past 20 years reveal that Coca-Cola's Gross Margin has consistently been robust, generally exceeding the Industry Median Gross Margin for most years. Specifically, data from recent years show Coca-Cola's Gross Margins of 0.6077 in 2019, 0.5931 in 2020, and 0.6027 in 2021, which suggest that 2022's drop was a deviation. The increasing trend in 2023 compared to the trendline could signify improved operational efficiencies or better market conditions. The increase is thus a positive signal for Coca-Cola.

Asset Turnover Ratio is growing?

Asset turnover is a measure of a company’s efficiency at using its assets to generate revenue. It is calculated by dividing net sales by average total assets.

Historical asset turnover ratio of Coca-Cola (KO)

The asset turnover for Coca-Cola (KO) has increased from 0.4596 in 2022 to 0.4804 in 2023, indicating a positive trend. This improvement is a positive signal, demonstrating that the company is enhancing its efficiency in utilizing its assets to generate sales. Even though this is an encouraging trend, it’s important to notice that the asset turnover has significantly dropped compared to its historical values, which were consistently above 1 before 2017, reaching a high of 1.468 in 2016. The decline since 2017 could be attributed to various strategic shifts, investments, or market conditions influencing asset efficiency. Despite the recent increase, there’s still room for improvement to return to historical levels. In this criterion, Coca-Cola scores 1 point.


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