LKQ 45.36 (+3.54%)
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Last update on 2024-06-06

LKQ (LKQ) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Analyze LKQ's financial health with 2023 Piotroski F-Score, covering profitability, liquidity, and operational efficiency for robust investment insights.

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: 4

We're running LKQ (LKQ) 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?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

The Piotroski F-Score evaluates a company's financial health on a scale from 0 to 9 using 9 criteria related to profitability, liquidity, and leverage. LKQ (LKQ) has a Piotroski Score of 4, indicating moderate financial health. It has positive net income and cash flow from operations, and it generates cash more effectively than it earns income. However, it has shown a decline in Return on Assets, an increase in leverage, and a decrease in its current ratio and gross margin. Additionally, its asset turnover ratio has decreased slightly.

Insights for Value Investors Seeking Stable Income

LKQ has some positive financial aspects, such as growing net income and strong operating cash flow. However, it also faces several challenges, including increasing leverage and declining ROA and gross margin. With a Piotroski Score of 4, it indicates that the company is neither particularly strong nor weak but fairly average. As an investor, it would be wise to conduct deeper research into the reasons behind the decline in certain metrics before making any investment decision.

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

Profitability of LKQ (LKQ)

Company has a positive net income?

Net income is a key indicator of a company's overall profitability. For Piotroski analysis, a positive net income is a sign of good financial health.

Historical Net Income of LKQ (LKQ)

LKQ (LKQ) boasts a net income of $936 million in 2023, which is positive, earning it 1 point in the Piotroski analysis. Evaluating its trend over the past 20 years, LKQ's net income has shown remarkable growth from $14.57 million in 2003 to $1.14 billion in 2022, before moderating slightly to $936 million in 2023. This trajectory illustrates the company’s robust profitability growth, although the slight drop in 2023 suggests a need for further investigation into potential causes. Overall, this positive net income trend is favorable and meets the criterion for scoring well in the analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the amount of cash generated by a company's regular business operations. It shows the company's ability to generate positive cash flow from its core activities.

Historical Operating Cash Flow of LKQ (LKQ)

In 2023, LKQ's Cash Flow from Operations stands at $1,356,000,000, which is positive. This indicates that the company is proficient in generating cash from its operational activities, a crucial aspect of financial health. Additionally, over the past 20 years, LKQ’s operating cash flow demonstrates an upward trend, suggesting consistent growth and operational efficiency. This positive and consistent CFO earns LKQ a point in the Piotroski Analysis.

Return on Assets (ROA) are growing?

Change in ROA for LKQ Corporation (LKQ) stands for Return on Assets and is used to measure the efficiency with which a company uses its assets to generate earnings. A higher ROA indicates a higher level of efficiency.

Historical change in Return on Assets (ROA) of LKQ (LKQ)

Unfortunately, LKQ Corporation (LKQ) experienced a decrease in their ROA from 0.0932 in 2022 to 0.069 in 2023. This downward trend signifies a decrease in efficiency in utilizing their assets to generate profits. If we delve into a historical analysis over the past 20 years, LKQ’s operating cash flow has shown considerable growth; for instance, it rose from $20,949,344 in 2003 to $1,356,000,000 in 2021 before slightly increasing to $1,356,000,000 in 2023. Despite the sporadic declining ROA observed in recent times, LKQ contrasts against the industry median ROA trends which consistently outperform LKQ’s metrics. In 2023, the industry median ROA was 0.196—substantially exceeding LKQ’s 0.069—illustrating potential areas of improvement. Therefore, this metric would be 0 points for LKQ due to its decrease.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income indicates that a company is generating sufficient cash to sustain and grow its operations, which hints at good financial health.

Historical accruals of LKQ (LKQ)

The Operating Cash Flow for LKQ in 2023 was $1.356 billion, significantly higher than the Net Income of $936 million for the same period. This trend is positive, as it suggests that LKQ is effectively converting sales into actual cash, enhancing its ability to reinvest in operations, pay off debt, or return value to shareholders. Historical context provided shows a generally increasing trend in both metrics over the last two decades, with occasional fluctuations. Most notably, even during years of lower net income, the operating cash flow has consistently stayed robust, reinforcing investor confidence and ensuring a solid point addition to their Piotroski score.

Liquidity of LKQ (LKQ)

Leverage is declining?

Change in Leverage evaluates if a company has decreased its level of financial leverage from one period to the next, generally measured by debt to assets ratio. Lower leverage is often seen as reducing financial risk.

Historical leverage of LKQ (LKQ)

In the case of LKQ (LKQ), the leverage ratio increased from 0.3084 in 2022 to 0.3195 in 2023. This reflects a rise in financial leverage, indicating the company has taken on more debt relative to its assets. This trend can be concerning from a financial risk perspective. Historically, examining the last 20 years, LKQ's leverage has seen fluctuations, with notable spikes in 2007 (0.379) and 2016 (0.3945). The recent increase may warrant scrutiny as it reverses the prior downward trend. As the leverage has increased, no point is awarded for this criterion.

Current Ratio is growing?

Change in Current Ratio measures the firm's ability to cover its short-term obligations. It is a liquidity metric essential for assessing financial health.

Historical Current Ratio of LKQ (LKQ)

The Current Ratio for LKQ in 2023 is 1.4671, down from 1.8749 in 2022. This paradigm shows a decline in the company's ability to meet short-term liabilities with its current assets. The trend suggests diminished liquidity, setting the score for this criterion to 0. Compared to the industry median, which stands at 1.7153 for 2023, LKQ's ratio is significantly lower, possibly indicating a riskier liquidity position than its peers. Historical data reveal this is the lowest Current Ratio observed for LKQ in the past two decades.

Number of shares not diluted?

This criterion analyzes whether the number of outstanding shares has decreased from the previous year. A decrease in outstanding shares typically indicates share buybacks, which can be a positive sign for shareholders as it often leads to an increase in the value of remaining shares.

Historical outstanding shares of LKQ (LKQ)

The outstanding shares decreased from 277,100,000 in 2022 to 267,600,000 in 2023. This reduction by approximately 3.43% suggests that LKQ Corporation engaged in share buybacks during this period. This trend is generally considered positive, as reducing the number of shares can enhance shareholder value by increasing earnings per share (EPS) and potentially boosting the stock price. Observing the historical data, LKQ's outstanding shares have seen periods of both increase and decrease over the past 20 years, with a notable decline in recent years indicating a focus on returning value to shareholders.

Operating of LKQ (LKQ)

Cross Margin is growing?

Change in Gross Margin compares the company's profitability over two consecutive years.

Historical gross margin of LKQ (LKQ)

The Gross Margin for LKQ in 2023 stands at 0.4021, a slight decrease from 0.4082 in 2022. This drop indicates a marginal decline in profitability, thereby earning 0 points for this criterion. This trend warrants consideration, as it diverges from the preceding upward trajectory witnessed between 2018 to 2022 and remains notably above the industry's median Gross Margin of 0.196% in 2023.

Asset Turnover Ratio is growing?

Change in Asset Turnover for LKQ (LKQ) examines the efficiency with which a company uses its assets to generate sales or revenue. A higher ratio indicates better performance and asset utilization.

Historical asset turnover ratio of LKQ (LKQ)

The Asset Turnover ratio for LKQ decreased from 1.0383 in 2022 to 1.0227 in 2023. Therefore, the Asset Turnover has not increased, resulting in 0 points for this criterion. Analyzing the historical data, LKQ has experienced fluctuations in its Asset Turnover over the last 20 years. For example, it reached its peak in 2003 at 1.7266, but had a significant drop to 0.9985 in 2007, during the financial crisis. Although the current ratio shows a slight decline compared to last year, it remains relatively stable in comparison to the more tumultuous periods in the company's past. Continuous monitoring is advisable to prevent potential inefficiencies.


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