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Last update on 2024-06-05

Medtronic (MDT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Explore Medtronic's (MDT) 2023 Piotroski F-Score analysis with a detailed evaluation of profitability, liquidity, and operational performance. Final score: 5/9.

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: 5

We're running Medtronic (MDT) 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?
0
Asset Turnover Ratio is growing?
0

The Piotroski F-Score is a metric that evaluates a company's financial health based on nine criteria related to profitability, liquidity, and operating efficiency. Medtronic's (MDT) score is 5 based on this system, indicating moderate financial health. Profit-wise, Medtronic has positive net income and cash flow and its operating cash flow exceeds net income, showcasing financial stability. However, its return on assets (ROA) has declined. As for liquidity, the current ratio is improving, but leverage has increased. Operationally, the number of shares has decreased, which is good, but gross margin and asset turnover ratio have both declined.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 5, Medtronic (MDT) shows some strengths and weaknesses. While the company is profitable and has strong cash flow, its declining ROA, increased leverage, and decreasing asset turnover and gross margin are concerns. Investors might want to consider these factors carefully. Medtronic's mixed results suggest it's worth keeping an eye on but may not be the best pick for those seeking a high-growth, low-risk investment. If you believe in the company's long-term strategies and can tolerate some risk, it could still be a worthwhile investment.

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

Profitability of Medtronic (MDT)

Company has a positive net income?

Net income criterion checks if a company is generating profit, indicating financial viability.

Historical Net Income of Medtronic (MDT)

Medtronic's net income for 2023 stands at $3,758 million, which is a positive figure. This signifies that the company is indeed generating profit, adding financial stability and potential for growth. Comparing it with historical data, it's observed that net income has shown fluctuations over the past 20 years, peaking in 2022 at $5,039 million. Despite the slight decline in 2023, the net income remains robust. Thus, for 2023, Medtronic earns 1 point for having a positive net income, reaffirming financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) represents the cash generated by a company's operating activities. A positive CFO indicates that the company is generating more cash than it is spending in its core operations. This is an important sign of financial health and efficiency.

Historical Operating Cash Flow of Medtronic (MDT)

Medtronic's Cash Flow from Operations (CFO) for 2023 was $6.039 billion, indicating a positive cash flow from operational activities. Since it is positive, it adds 1 point according to the Piotroski F-Score methodology. Over the past 20 years, Medtronic has consistently maintained a positive CFO, reflecting robust operational efficiency and strong financial health. This trend is favorable, indicating that Medtronic has been able to generate substantial cash from its core business, adapting to various market conditions and persistently driving value for shareholders. The positive CFO thus reassures investors of the company's continuous operational robustness.

Return on Assets (ROA) are growing?

The Return on Assets (ROA) criterion assesses a company's ability to generate profit from its assets. Ideally, an increasing ROA signifies better efficiency in asset utilization.

Historical change in Return on Assets (ROA) of Medtronic (MDT)

Medtronic's ROA over the past year has declined from 0.0548 in 2022 to 0.0413 in 2023. This demonstrates a decrease in efficiency in asset use, which is not a positive trend. Moreover, when comparing across the industry, where the median ROA has been consistently above 0.540, Medtronic's declining ROA reflects a performance that is significantly below its peers. This warrants a concern about the company's operational efficiency. Therefore, this criterion will score 0 points.

Operating Cashflow are higher than Netincome?

Operating Cash Flow (OCF) quantifies the cash a company generates from its regular business activities. Net Income, however, is influenced by non-cash items. OCF exceeding Net Income shows strong cash generativity.

Historical accruals of Medtronic (MDT)

With an Operating Cash Flow of $6.039 billion versus Net Income of $3.758 billion in 2023, Medtronic (MDT) shows stronger cash generativity. Adding 1 point for OCF > Net Income, this positive trend bolsters Medtronic's liquidity and operational effectiveness.

Liquidity of Medtronic (MDT)

Leverage is declining?

This criterion measures the change in Medtronic's (MDT) financial leverage from one year to the next, assessing if the company's dependence on debt has increased or decreased.

Historical leverage of Medtronic (MDT)

Comparing Medtronic's leverage ratio of 0.2239 in 2022 with 0.2677 in 2023, it's clear that the leverage has increased in 2023. This increase in leverage indicates a higher dependency on debt financing, which might be seen as negative from a conservative investment perspective since it implies higher financial risk. Given the trend over the last 20 years, Medtronic's leverage has generally fluctuated, with notable increases and decreases, but the increase for 2023 breaks a declining trend seen from 2015 to 2018. For this specific criterion, since the leverage has increased in 2023, it receives a score of 0, reflecting poorly on this financial aspect.

Current Ratio is growing?

The current ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. An increase is considered favorable.

Historical Current Ratio of Medtronic (MDT)

Medtronic's current ratio increased from 1.8605 in 2022 to 2.3948 in 2023, which suggests better short-term financial health and liquidity. This is a positive trend, earning it a point per the Piotroski Analysis. Over the last 20 years, Medtronic's current ratio has generally remained competitive compared to the industry median, except for some fluctuations. Overall, the current improvement is in line with maintaining robust financial stability.

Number of shares not diluted?

Change in shares outstanding measures whether a company is repurchasing shares or issuing new ones.

Historical outstanding shares of Medtronic (MDT)

In 2022, Medtronic had 1,342,400,000 outstanding shares, whereas in 2023, it had 1,329,800,000 shares. This indicates a decrease in outstanding shares which is generally positive, as it shows the company is repurchasing its stock, thereby increasing the ownership stake of existing shareholders. Over the last 20 years, the trend has fluctuated, seeing the lowest number at around 1,020,000,000 in 2013, spiking significantly in 2014 to approximately 1,426,000,000, and then gradually decreasing again. The positive decrease in 2023 from 2022 implies a focus on share buybacks, and thus, a 1 point should be awarded for 2023 in this criterion.

Operating of Medtronic (MDT)

Cross Margin is growing?

Gross Margin measures a company's financial health and operational efficiency by indicating the percentage of revenue exceeding the cost of goods sold. Monitoring trends helps in assessing competitiveness.

Historical gross margin of Medtronic (MDT)

For Medtronic (MDT), the Gross Margin in 2023 was 0.6567 compared to 0.6798 in 2022. This indicates a decline in Gross Margin. Hence, for this criterion, we will set the score to 0. Over the last 20 years, Medtronic's Gross Margin shows notable fluctuations. Notably, the Gross Margin peaked at 0.759 in 2010 but has generally seen a downward trend since. When compared to the industry median, Medtronic's Gross Margin has consistently outperformed it, affirming its strong competitive position despite recent declines. This downward trend in 2023 could be a short-term anomaly or indicative of deeper operational inefficiencies.

Asset Turnover Ratio is growing?

Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue. Higher asset turnover indicates more efficient use of assets.

Historical asset turnover ratio of Medtronic (MDT)

Medtronic's asset turnover ratio decreased from 0.3443 in 2022 to 0.3433 in 2023. This slight decrease suggests that the company has become slightly less efficient in using its assets to generate revenue. Historically, Medtronic's asset turnover has seen a declining trend over the past 20 years, from 0.6601 in 2003 to 0.3433 in 2023. This indicates a long-term challenge in maintaining operational efficiency. Thus, no points are added for this criterion in Piotroski analysis.


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