Last update on 2024-06-07

Monro (MNRO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Detailed Piotroski F-Score analysis for Monro (MNRO) in 2023. Current score: 5/9. Insightful breakdown of profitability, liquidity, and efficiency metrics.

Short Analysis - Piotroski Score: 5

We're running Monro (MNRO) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score for Monro (MNRO) is 5 out of 9, indicating a moderate financial health. Monro (MNRO) showed strengths in positive net income, strong cash flows, decreasing leverage, and share reduction, suggesting reasonable financial stability and effective shareholder value policy. However, concerns arise due to declining return on assets, a decrease in current ratio, reducing gross margin, and falling asset turnover ratio, which reflects operational inefficiencies and weakening liquidity.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski score and the underlying criteria analysis, Monro (MNRO) presents mixed signals. Its strong cash flow and improved leverage are offset by declining efficiency metrics. While this stock merits consideration due to its solid cash position and reduced leverage, potential investors should be cautious and delve deeper into understanding the reasons behind its declining operational efficiencies and ROA. It might be worth looking into if these concerns are addressed or showing improvement in subsequent quarters.

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

Profitability of Monro (MNRO)

Company has a positive net income?

Net income, which refers to the reputation of the financial health of an organization, is crucial. It is an indicator of the company's profitability and its ability to generate earnings.

For the year 2023, Monro (MNRO) reported a net income of $39,048,000, which is positive, thus assigning it a Piotroski score of 1 in this criterion. Despite this being a favorable outcome for 2023, a look at the historical data reveals fluctuating trends with significant year-over-year changes. For instance, the net income dropped sharply from $79,752,000 in 2019 to $58,024,000 in 2020, indicating potential volatility in earnings. Although recent figures show a positive income, investors should be cautious of the variability evident in the earnings history and consider the consistency of future potential profitability.

Company has a positive cash flow?

CFO checks if the company generates sufficient cash from its core business operations, a positive sign of financial health.

Monro's CFO for 2023 is a robust $215,016,000. This positive cash flow signifies effective core business operations and overall financial health. Over the past 20 years, Monro has demonstrated a consistent increase in its operating cash flow, starting from $27,389,000 in 2003 and advancing to $215,016,000 in 2023. This upward trend, especially substantial in recent years, underscores Monro's growing operational efficiency, resilience, and capacity to generate cash from its primary business activities. Thus, Monro earns 1 point in this criterion.

Return on Assets (ROA) are growing?

Change in ROA measures the company's capability to generate profit from its assets in comparison to the previous period. It is an essential indicator of how efficiently the company's management is utilizing its assets to generate earnings, relative to the previous year.

In 2023, Monro's Return on Assets (ROA) decreased from 0.0334 in 2022 to 0.0214, marking a decline. This signifies a less efficient use of the company's assets to generate earnings. When examining the past 20 years' data, Monro has demonstrated varying performance. In the early 2000s the ROA was relatively modest. However, it showed improvement, although it remains below the industry median of 0.196 in 2023. This trend is concerning as Monro seems to be struggling with achieving industry-level efficiency. It's noteworthy that while Monro had its ups and downs, the recent drop suggests potential operational challenges or capital allocation inefficiencies. This is a critical area for the company to address to enhance profitability.

Operating Cashflow are higher than Netincome?

This criterion measures the relationship between a company’s operating cash flow and its net income.

For 2023, Monro’s (MNRO) operating cash flow stands at $215.02 million, which is significantly higher than its net income of $39.05 million. According to the Piotroski Analysis, this outcome merits a score of 1, as a higher operating cash flow compared to net income suggests that the company’s earnings quality is high and it isn’t relying too much on non-cash accounting items. This difference of $175.97 million highlights positive accruals which means positive adjustments to net income from non-cash expenses. Historically, Monro has persistently maintained a higher operating cash flow than net income for each of the past 20 years as indicated by the additional data. This trend reinforces the robustness and reliability of Monro’s earnings trajectory over an extended period.

Liquidity of Monro (MNRO)

Leverage is declining?

The Change in Leverage criterion examines the difference in the company's leverage from one year to the next. Leverage is calculated as the ratio of total debt to total assets. A decline in leverage indicates that the company is less reliant on borrowed money to finance its operations, which could be a sign of improving financial health and lower financial risk.

The leverage for Monro (MNRO) has shifted from 0.3883 in 2022 to 0.3328 in 2023. Given that leverage has decreased, this qualifies for adding a point in the Piotroski Score framework. Over a span of 20 years, Monro's leverage ratio fluctuated significantly, seeing peaks in 2008 at 0.3309 and troughs in 2011 at 0.0929. The downward trend in 2023 from the previous year reflects positively on the company's financial stability and its capability to reduce its debt burden.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term liabilities with short-term assets. A higher ratio indicates better liquidity.

In 2023, Monro's (MNRO) current ratio decreased to 0.5754 from 0.7625 in 2022. This indicates a reduction in liquidity, which is concerning. The industry median is 1.7153, showing MNRO is significantly below industry norms, scoring 0 points.

Number of shares not diluted?

The change in shares outstanding is a key criterion in the Piotroski analysis as it can signal either possible dilution or stock repurchase, affecting shareholder value.

In 2022, Monro (MNRO) had 33,527,000 outstanding shares, which decreased to 32,144,000 shares in 2023. This reduction of approximately 4.12% is a positive sign under the Piotroski criteria, as it suggests that the company has possibly repurchased shares, thus increasing shareholder value and confidence. Over the past 20 years, the outstanding shares generally trended upwards, with some fluctuations. The last two years show a decrease, consistent with strategic buybacks. Consequently, Monro earns 1 point for this criterion, indicating a shareholder-friendly move.

Operating of Monro (MNRO)

Cross Margin is growing?

Explanation of Gross Margin and its change.

In 2023, Monro (MNRO) reported a gross margin of 0.3442 compared to 0.3545 in 2022. This indicates a decline in gross margin. A decrease in gross margin can imply rising costs or declining revenues. Considering the past 20 years, Monro's gross margin has shown fluctuations but has consistently stayed above the industry median. However, the recent decline depreciates from the trend of stability seen until 2020, dropping from 0.3511 in 2021 and further from 0.3545 in 2022. In contrast to industry trends, where the median gross margin has marginally increased to 0.196, Monro's subsequent decrease is an outlier. Point = 0. Continuing this pattern could warrant scrutiny into operational efficiencies and revenue strategies.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets to generate sales revenue. It is calculated by dividing sales revenue by total assets.

Comparing the Asset Turnover in 2023 (0.7266) with that of 2022 (0.7381), we find that there has been a decrease in asset turnover. It indicates that Monro has become slightly less efficient in generating revenue from its assets. Historically, we can see from data over the last 20 years that Monro's Asset Turnover has been declining consistently with a few minor upticks. For example, Asset Turnover was 1.3131 in 2003 but has dropped to 0.7266 in 2023. Given this trend, a decreasing Asset Turnover moving from 2022 to 2023 is concerning and warrants attention. The Piotroski score in this criterion would be 0 due to the decrease in efficiency.