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Last update on 2024-06-07

Leidos Holdings (LDOS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze Leidos Holdings (LDOS) Piotroski F-Score for 2023. Final score: 7/9. Learn about profitability, liquidity, and operational efficiency criteria.

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: 7

We're running Leidos Holdings (LDOS) 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?
0
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

Leidos Holdings (LDOS) achieved a Piotroski F-Score of 7 out of 9, indicating a strong financial position based on several criteria: profitability, liquidity, and operating efficiency. Positive aspects include a positive net income of $199 million in 2023, consistently strong cash flows, and an improved current ratio. However, there are areas of concern such as the declining return on assets and increasing leverage, which could signify higher risk and reduced operational efficiency compared to previous years. Overall, the company has demonstrated a capacity to generate cash and manage its short-term liabilities effectively.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, Leidos Holdings (LDOS) appears to be a potentially strong investment due to its healthy financial status. However, investors should take note of the declining net income and increasing leverage, and consider investigating these trends further. If LDOS can address these issues, it may present a solid investment opportunity. As always, it's essential to conduct further research or consult with a financial advisor before making any investment decisions.

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

Profitability of Leidos Holdings (LDOS)

Company has a positive net income?

This criteria checks if a company's net income is positive for the fiscal year, indicating profitability.

Historical Net Income of Leidos Holdings (LDOS)

For 2023, Leidos Holdings (LDOS) reported a net income of $199 million, which is indeed positive. This adds 1 point in the Piotroski analysis. However, when examining the net income data over the last 20 years, there are fluctuations, including negative results in 2015 with -$323 million. The trend shows that while the company has been profitable for most of the years, 2023 shows a lower income compared to previous years. This data point is good for the criterion but suggests a need for further investigation into why net income has decreased so significantly from previous years like 2021 and 2022 which were $753 million and $685 million, respectively.

Company has a positive cash flow?

The measure of Cash Flow from Operations (CFO) assesses a company's ability to generate sufficient cash flow to maintain and grow its operations, which is crucial for valuation and financial health.

Historical Operating Cash Flow of Leidos Holdings (LDOS)

For Leidos Holdings (LDOS), the Cash Flow from Operations (CFO) for 2023 stands at $1,165,000,000, which is a positive indicator (1 point). Over the last 20 years, the company has generally managed to maintain positive operating cash flows, except in the years 2004 and 2005. This trend suggests robust operational efficiency and a strong ability to generate cash flow, which is essential for funding ongoing operations and growth initiatives. In particular, the steady increase from the lower figures of around $195 million in 2014 to over a billion dollars in recent years, highlights a significant improvement in financial performance.

Return on Assets (ROA) are growing?

Return on Assets (ROA) assesses how efficiently a company can manage assets to produce profits. A higher ROA indicates better asset utilization.

Historical change in Return on Assets (ROA) of Leidos Holdings (LDOS)

Leidos Holdings (LDOS) saw a decrease in its ROA from 0.052 in 2022 to 0.0154 in 2023. This decline in the ability to efficiently generate profit from assets is detrimental. Historically, industry median ROA is consistently above 0.28, revealing LDOS's lower performance relative to peers in 2023. Given this, the ROA score is 0.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income indicates that a company's cash-generating capability is strong. This positive gap can signal efficient management and quality earnings.

Historical accruals of Leidos Holdings (LDOS)

For 2023, Leidos Holdings (LDOS) shows an Operating Cash Flow of $1,165,000,000 compared to a Net Income of $199,000,000. This significant difference suggests robust cash generation capabilities—a promising indicator for evaluating the firm's efficiency. When comparing against historical data, it's evident that such favorable margins have been consistent in recent years, which enhances the credibility of the firm's earnings. Thus, this criterion scores a +1. However, in the years 2015 and 2013, there were substantial deviations, showing less favorable margins, hinting towards historical volatility.

Liquidity of Leidos Holdings (LDOS)

Leverage is declining?

Leverage refers to the ratio of debt to equity, which measures the extent to which a company is financing its activities through debt as opposed to wholly-owned funds.

Historical leverage of Leidos Holdings (LDOS)

The leverage of Leidos Holdings has increased from 0.3441 in 2022 to 0.408 in 2023, translating to greater dependence on debt financing. This increase in leverage means it's riskier, reflecting a possible strategy to fuel growth through borrowing but with higher financial vulnerability. Historically, the company's leverage trend has varied, with significant increases at various points, such as 2019 and 2012, and decreases in other years. This increasing trend in leverage can be both a sign of aggressive growth strategies needing capital and a potential red flag concerning financial stability, indicating a 0 point for this criterion.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to cover its short-term liabilities with its short-term assets. An increase solidifies a company's financial stability.

Historical Current Ratio of Leidos Holdings (LDOS)

Comparing the Current Ratio of 1.3395 in 2023 to that of 0.923 in 2022, it is evident that Leidos Holdings (LDOS) has experienced an increase in its Current Ratio. Consequently, an additional point is awarded according to the Piotroski Analysis methodology. Historically, the company's current ratio has gone through fluctuations, peaking at 2.9531 in 2006 and reaching lows in recent years. While the industry median has remained relatively stable around 1.5, Leidos Holdings' increased Current Ratio to 1.3395 now places it closer to the industry's trend, signaling an enhancement in short-term financial health after a dip below 1 in 2022.

Number of shares not diluted?

This criterion examines whether the number of outstanding shares has decreased over the recent fiscal year. A decrease is generally positive because it suggests share buybacks, which potentially increase the ownership value for remaining shareholders.

Historical outstanding shares of Leidos Holdings (LDOS)

The number of outstanding shares for Leidos Holdings remained constant at 137,000,000 in 2022 and 2023, indicating no change. Thus, there is no point added for this criterion. However, evaluating the last 20 years shows minor fluctuations in the number of shares, with interaction notably around the 2015-2018 period, peaking at 154,000,000 in 2018 before reducing to 137,000,000 thereafter. This trend hints at a stable approach by the company towards share repurchases, yet the lack of reduction from 2022 to 2023 does not support adding a Piotroski point.

Operating of Leidos Holdings (LDOS)

Cross Margin is growing?

The change in Gross Margin criterion evaluates whether a company has improved its efficiency in converting revenue into gross profit over time. An increasing Gross Margin suggests operational improvements and potential for higher profitability, making it a crucial factor for investors to consider.

Historical gross margin of Leidos Holdings (LDOS)

Based on the provided data, Leidos Holdings (LDOS) has shown a slight improvement in its Gross Margin from 0.1448 in 2022 to 0.1454 in 2023. This reflects a positive trend, suggesting that the company has been able to enhance its operational efficiency, albeit marginally. The increase, though small, is significant given that maintaining or improving Gross Margins can be challenging in a competitive industry. Additionally, over the past 20 years, the industry median Gross Margin has generally been higher than that of Leidos. For example, in 2023, the industry median stood at 0.3391 compared to Leidos' 0.1454. Despite the industry’s higher median, Leidos' continued improvements in Gross Margin indicate a strengthening position within its operational framework. Therefore, a point is awarded for this criterion.

Asset Turnover Ratio is growing?

The asset turnover ratio measures a company's ability to generate sales from its assets. An increase indicates better efficiency in using assets.

Historical asset turnover ratio of Leidos Holdings (LDOS)

In 2023, Leidos Holdings (LDOS) recorded an asset turnover ratio of 1.1983, up from 1.0934 in 2022. This rise indicates improved efficiency, marking a positive development for LDOS. Historically, the ratio peaked at 2.0973 in 2010 and saw sharp declines during economic downturns, such as 1.1501 in 2013, but has shown recovery since 2015. The increase in 2023, despite a volatile historical trajectory, suggests LDOS is utilizing its assets more effectively now. Hence, for the Piotroski analysis, this improvement adds 1 point.


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