LW 79.03 (-0.4%)
US5132721045Consumer Packaged GoodsPackaged Foods

Last update on 2024-06-05

Lamb Weston Holdings (LW) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Lamb Weston Holdings (LW) scores 7/9 in the Piotroski F-Score, showcasing strong financials in 2023 through high profitability, liquidity, and efficient operations.

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 Lamb Weston Holdings (LW) 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?
0
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 Piotroski F-Score is designed to measure the financial strength of a company using a score between 0 to 9 based on 9 criteria related to profitability, liquidity, and operating efficiency. A short analysis of Lamb Weston Holdings (LW) shows a Piotroski F-Score of 7, suggesting a strong financial position. The analysis reveals the company has a positive net income and cash flow, improving ROA, decreasing leverage, fewer shares outstanding, and increasing gross margin and asset turnover. However, areas of concern include operating cash flow being lower than net income, and a declining current ratio, indicating potential liquidity issues.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 7, Lamb Weston Holdings demonstrates a positive, strong financial position, reflecting solid management and operational efficiency. Despite some areas needing attention like liquidity concerns and the disparity between operating cash flow and net income, the overall financial health seems strong. Investing in LW could be worthwhile, but as with all investments, it's wise to conduct more detailed and comprehensive research before making any financial decisions. Evaluating other relevant financial metrics and comparing LW to industry benchmarks could provide additional insight.

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

Profitability of Lamb Weston Holdings (LW)

Company has a positive net income?

Net income measures a company's profitability over a specific period and indicates its financial health.

Historical Net Income of Lamb Weston Holdings (LW)

Lamb Weston Holdings (LW) has a net income of $1,008,900,000 in 2023, which is significantly positive. This is a notable improvement from the previous year where the net income was $200,900,000. Over the last 10 years, the net income has generally grown, with some fluctuations such as the dip in 2022. With this positive net income in 2023, Lamb Weston Holdings earns 1 point for this criterion, reflecting its enhanced profitability.

Company has a positive cash flow?

The Cash Flow from Operations criterion examines whether the company generates enough cash to cover its operations.

Historical Operating Cash Flow of Lamb Weston Holdings (LW)

Lamb Weston Holdings (LW) reported a Cash Flow from Operations (CFO) of $761.7 million in 2023, which is positive. This is a significant improvement from the previous year's $418.6 million. Historically, the company has consistently maintained a positive CFO over the past decade, with a noticeable upward trend since 2014. This positive CFO adds 1 point to Lamb Weston's Piotroski Score, indicating financial strength and efficient operations management.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures the company's ability to increase profits relative to its total assets. A higher ROA indicates better management efficiency.

Historical change in Return on Assets (ROA) of Lamb Weston Holdings (LW)

Lamb Weston Holdings (LW) exhibited a significant increase in its Return on Assets (ROA) from 0.0481 in 2022 to 0.1893 in 2023. This improvement is indicative of enhanced management efficiency and a more effective utilization of assets to generate profits. In comparison to the industry's median ROA, which remained relatively consistent—hovering around the 0.28-0.31 mark over the past decade—Lamb Weston's ROA in 2023 still falls short. However, the marked improvement in a single year is a positive sign. Historically, the company's operating cash flow has also seen ups and downs but notably surged to $761.7 million in 2023 from $418.6 million in 2022, substantiating the positive shift in ROA metrics. Hence, for the Piotroski score, Lamb Weston earns 1 point for the positive change in ROA.

Operating Cashflow are higher than Netincome?

This criterion is important to assess the quality and sustainability of a company's earnings.

Historical accruals of Lamb Weston Holdings (LW)

In 2023, Lamb Weston Holdings' operating cash flow stood at $761.7 million, while net income was significantly higher at $1.009 billion. Thus, the Operating Cash Flow being lower than Net Income results in 0 points. This trend might indicate that earnings are not as high-quality and less likely to be sustainable in the long-term. Reviewing the last 10-year data, the operating cash flow grew from $386.4 million in 2014 to the 2023 value of $761.7 million, demonstrating management's ability to improve cash generation. However, net income surged more dramatically, from $260.9 million in 2014 to the staggering $1.009 billion in 2023. This disparity between growth rates could raise concerns about potential earnings management or non-cash components inflating net income projections, as also indicated by increased accruals accounting the income quality.

Liquidity of Lamb Weston Holdings (LW)

Leverage is declining?

Change in Leverage looks at the capacity of the company to meet its financial obligations. A decrease is seen as favorable as it shows improving financial stability.

Historical leverage of Lamb Weston Holdings (LW)

Examining Lamb Weston Holdings' leverage, we observe that it was 0.6512 in 2022 and reduced to 0.4982 in 2023. This clearly indicates a decrease in leverage, suggesting improved financial health, as the company is less reliant on debt to finance its assets. Over the past 20 years, the company's leverage has fluctuated, notably high during 2016-2018, and significantly improving recently. This positive trend awards the company 1 point for the Piotroski score as it reflects better risk management and financial discipline. The improvement enhances LW’s ability to withstand economic fluctuations, providing greater confidence to investors.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets. It is significant because it provides insights into the financial health and operational efficiency of the business.

Historical Current Ratio of Lamb Weston Holdings (LW)

The Current Ratio for Lamb Weston Holdings (LW) in 2023 is 1.5639, a notable decrease from the 2.3739 recorded in 2022. This unfavorable trend inversely affects the criterion, resulting in a score of 0 instead of 1. Delving into numbers, this ratio stands below the industry median of 1.6315 whereas in the previous year, the ratio of 2.3739 substantially outclaimed the industry's 1.8329. The downward spiral can signal potential liquidity problems, hinting that Lamb Weston must optimize its current assets to cover its liabilities efficiently. The last 10 years' trajectory also reveals fluctuations, with ratios previously ranging from a high of 2.8821 in 2021 to a low of 1.5452 in 2017. Such inconsistency indicates underlying shifts or structural adjustments within the company, emphasizing the need for prudent financial management.APPLICATION/PHP:ERntlgrpc_error_children_v79

Number of shares not diluted?

This criterion considers whether the number of shares outstanding has decreased from one year to the next. A reduction in outstanding shares can indicate share buybacks, which may suggest management's confidence in the company.

Historical outstanding shares of Lamb Weston Holdings (LW)

In 2022, Lamb Weston Holdings (LW) had 145,500,000 outstanding shares, and this number decreased to 144,500,000 in 2023. This reduction in outstanding shares suggests that the company may have engaged in share buybacks during this period. Share buybacks are generally seen as a positive sign, indicating that management believes the stock is undervalued and that the company has sufficient free cash flow to invest in its own shares. Over the last 20 years, the trend of outstanding shares fluctuates, indicating periodic share issuances and buybacks. For the Piotroski Analysis, considering the one-year reduction in outstanding shares from 2022 to 2023, the company earns 1 point for this criterion.

Operating of Lamb Weston Holdings (LW)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold. It indicates the efficiency of a company in production and pricing.

Historical gross margin of Lamb Weston Holdings (LW)

Lamb Weston Holdings (LW) saw its Gross Margin increase from 0.203 in 2022 to 0.2677 in 2023, signaling improved efficiency and profitability in production and pricing strategies. This shift represents a growth of around 6.47 percentage points year-over-year. Such augmentation in Gross Margin surpasses many of its recent years, only behind its peak (0.2671) in 2019, once again placing LW in a stronger position relative to peers. Furthermore, while the industry median Gross Margin in 2023 continues to be slightly higher at 0.282, LW has performed markedly better than in past years, inching closer to the industry benchmark. This upward trend is indeed positive and suggests effective management and cost control practices at LW, deserving an additional 1 point in the Piotroski F-Score.

Asset Turnover Ratio is growing?

Asset Turnover measures a firm's efficiency in using its assets relative to the revenue it generates.

Historical asset turnover ratio of Lamb Weston Holdings (LW)

For Lamb Weston Holdings (LW), the Asset Turnover ratio increased slightly from 0.9819 in 2022 to 1.0039 in 2023. This trend is indicative of the company improving its efficiency in utilizing its assets to generate revenue. Notably, it's worth highlighting that this marks a positive change after the significant dip seen in 2020 and 2021 due to disruptions, likely from the COVID-19 pandemic. Over the past decade, the company has seen a downward trend in asset turnover from its peak in 2015 at 1.4677. Despite the recent improvement, LW’s Asset Turnover has not yet recovered to its past highs, which indicates that while the current figures show improvement, there remains significant scope for further enhancement of asset efficiency. Accordingly, this criterion results in an addition of 1 point in the Piotroski score.


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