Last update on 2024-06-07

LEG Immobilien (LEG.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Advanced Piotroski F-Score Analysis for LEG Immobilien (LEG.DE) for 2023 reveals a mixed financial health with a final score of 4/9, highlighting key metrics.

Short Analysis - Piotroski Score: 4

We're running LEG Immobilien (LEG.DE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

LEG Immobilien's Piotroski F-Score is 4 out of 9, indicating modest financial strength. Key positive points include healthy cash flow from operations, a growing asset turnover, and an improving gross margin. Nevertheless, there are significant red flags like a steep decline in net income, increased leverage, reduced current ratio, and share dilution. Overall, the company's profitability, liquidity, and operating efficiency present a mixed picture with concerns over its financial stability due to the negative net income and increased debt levels.

Insights for Value Investors Seeking Stable Income

Based on this Piotroski F-Score analysis, LEG Immobilien shows some financial strengths but also several weaknesses. The net income is significantly negative and there are increases in leverage and reductions in liquidity which raise concerns. For a cautious investor, it may be worth looking into other stocks with better overall scores or waiting to see if the company can stabilize its finances before making an investment. However, if you are okay with taking higher risks for potentially higher rewards, monitoring this company's ability to manage its operational cash flows might provide some investment opportunities.

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

Profitability of LEG Immobilien (LEG.DE)

Company has a positive net income?

Net income is a critical measure of a company’s profitability and indicates its financial performance over a period.

LEG Immobilien reported a net income of -1,568,700,000 EUR for the fiscal year 2023. This is a significant downturn compared to previous years, showing a steep decline from a net income of 2,340,000 EUR in 2022. This represents a notable deviation from positive figures over the last decade, which included highs such as 1,721,600,000 EUR in 2021. Consequently, this negative net income scores 0 points in Piotroski's analysis, reflecting poorly on the company's profitability and potentially raising concerns about its financial stability.

Company has a positive cash flow?

Operating cash flow (CFO) indicates the cash a company generates from its core business operations. Positive CFO is crucial as it signifies the company is capable of generating sufficient revenue to maintain and grow operations.

LEG Immobilien reports a positive cash flow from operations of €447.9 million in 2023. This is a positive trend and indicates robust operational health. Historically, LEG has exhibited upwards momentum in CFO, starting from €77.3 million in 2011, reaching €389 million in 2022, and culminating in the current €447.9 million. This continuity indicates sustained operational efficiency, addressing investor concerns over core business profitability and stability, and underscoring the firm's competence in managing operational costs effectively.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures how efficiently a company uses its assets to generate profit. Comparing ROA year over year provides insight into management effectiveness and company profitability.

From 2022 to 2023, LEG Immobilien saw a significant decline in ROA from 0.0112 to -0.0772. This negative trend indicates a decrease in profitability and efficiency, scoring 0 points for this criterion. Over the last 20 years, the industry median ROA has also been declining, but LEG's current ROA is notably below the industry average of 0.4039 for 2023. This downward trend raises concerns about the company's asset utilization and profitability against industry benchmarks.

Operating Cashflow are higher than Netincome?

This criterion assesses whether a company is generating sufficient cash from its operations to cover its net income. Cash flows are crucial as they indicate the quality of earnings and sustainability.

Given that LEG Immobilien's operating cash flow (447.9 million EUR) is significantly higher than its net income (-1.5687 billion EUR) in 2023, this is a positive indicator, earning a score of 1. This disparity suggests that while the recorded net income is negative, the company is still generating a healthy amount of cash from its core operations. This can be interpreted as a sign of strong operational health, as cash flows are less susceptible to accounting manipulations compared to net income. Over the past decade, LEG Immobilien has shown a consistent increase in operating cash flow, underlining its robust cash-generating capabilities even amidst volatile economic conditions.

Liquidity of LEG Immobilien (LEG.DE)

Leverage is declining?

Change in leverage measures whether a company is reducing its reliance on debt relative to its equity. Lower leverage is seen as positive for solvency and reduces financial risk.

LEG Immobilien's leverage for the fiscal year 2022 stood at 0.4311, rising to 0.4626 in 2023. This indicates an increase in leverage by approximately 7.3% year-on-year. A higher leverage ratio suggests that the company is expanding its debt in relation to equity, which can elevate financial risk and potentially strain its solvency. The trend, implicating a move towards higher debt levels, should be closely monitored, particularly in a rising interest rate environment where debt servicing costs could elevate significantly. Historically, LEG's leverage has seen fluctuations but the recent uptrend break is a noteworthy departure from the relative stability observed in the past. Hence, according to the Piotroski F-Score, this metric would result in a score of 0 as the leverage has indeed increased in 2023.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term obligations with its short-term assets, serving as a liquidity metric.

The current ratio for LEG Immobilien decreased from 1.0 in 2022 to 0.8293 in 2023. This change implies that the company's liquidity has weakened, which can be a concern for meeting short-term obligations. Comparatively, the industry median current ratio in 2023 is 1.6881, significantly higher than LEG Immobilien's. Over the past 20 years, the company's current ratio has often been below the industry median, generally indicating poorer liquidity. Consequently, the decrease in 2023 results in a score of 0 for this criterion, reflecting a negative trend.

Number of shares not diluted?

Change in shares outstanding is a measure of dilution and capital structure strategy.

The outstanding shares of LEG Immobilien increased from 73,509,719 in 2022 to 74,109,276 in 2023. According to the Piotroski F-score, this would result in 0 points as an increase in shares suggests dilution. Over the last 20 years, notable increases align with capital raising activities, visible particularly in the jump from 18,163,620 in 2012 to over 52 million in 2013. This specific year-on-year increase might imply new issuance to fund operations or growth, requiring investors to remain mindful of potential impacts on EPS and ownership stakes.

Operating of LEG Immobilien (LEG.DE)

Cross Margin is growing?

Gross Margin represents the proportion of revenue remaining after deducting cost of goods sold, an important measure of profitability. A higher Gross Margin indicates better efficiency in converting revenue into actual profit.

LEG Immobilien's Gross Margin in 2023 stands at 0.4672, a significant improvement from 0.3585 in 2022. This increase means LEG immobilien has become more efficient in managing its costs relative to its revenue, earning a point in the Piotroski Analysis. Over the past two decades, the company's Gross Margin has seen fluctuations but the current increase is a positive trend. Specifically, its Gross Margin in 2023 outperformed the industry median of 0.4039, indicating that LEG Immobilien is not only improving but also performing above industry standards.

Asset Turnover Ratio is growing?

The Asset Turnover ratio measures the efficiency of a company in using its assets to generate revenue. It is an important indicator of operational performance.

Comparing of LEG Immobilien's Asset Turnover for 2023, which is 0.061, with 2022, which is 0.0548, reveals an increase. This rise in the ratio signifies improved operational efficiency in generating revenue from its assets. Therefore, according to Piotroski's criterion, we add 1 point. Observing a slightly broader timeline, the Asset Turnover has been gradually recovering from its low of 0.0536 in 2021, indicating a positive trajectory in asset efficiency albeit still below its peaks of the early 2010s.