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Last update on 2024-06-06

Marathon Oil (MRO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Detailed Piotroski F-Score analysis of Marathon Oil (MRO) for 2023 with a final score of 5/9, providing insights on its financial strength and criteria specifics.

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 Marathon Oil (MRO) 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?
1
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 based on nine criteria. Marathon Oil (MRO) has been analyzed using this score, achieving a total of 5 out of 9 points. It shows a positive net income ($1.554 billion) and cash flow from operations ($4,087 million). The company's operating cash flow exceeds net income, which is a good sign. The number of shares outstanding has decreased significantly, indicating share buybacks. However, the company's Return on Assets (ROA) has declined, leverage has increased, current ratio has decreased, and both gross margin and asset turnover have decreased, which are areas of concern.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Marathon Oil (MRO) presents a mixed picture. While it demonstrates strength in profitability and operational cash flow, the declines in ROA, leverage increase, and reduced efficiency in asset use are red flags. Therefore, if you are considering investing in Marathon Oil, it might be prudent to look deeper into these areas of concern and compare it with other potential investments, especially if stability and efficient use of assets are important to you.

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

Profitability of Marathon Oil (MRO)

Company has a positive net income?

Net income is the company's total profit, reflecting the performance of the business. It is crucial as positive net income indicates profitability, while negative net income points to potential problems.

Historical Net Income of Marathon Oil (MRO)

For 2023, Marathon Oil (MRO) reported a net income of $1.554 billion, which is a positive figure. Therefore, under the Piotroski F-Score criteria, this adds 1 point. Historically, MRO's net income has seen fluctuations, including substantial losses in 2015 and 2016. However, the recent positive trend, culminating in $1.554 billion in 2023, signals a recovery and an overall profitable year for MRO. This indicates a good financial health improving over the recent years, reflecting effective management and favorable market conditions.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is critical as it measures the cash generated from core business operations, excluding financing and investment activities.

Historical Operating Cash Flow of Marathon Oil (MRO)

For 2023, Marathon Oil (MRO) has reported a positive CFO of $4,087,000,000, thus meeting this Piotroski criterion and scoring 1 point. Over the past 20 years, the company's CFO has varied significantly, peaking at $6,782,000,000 in 2008 and hitting a low of $1,073,000,000 in 2016. The 2023 figure, although not at historical highs, is robust and indicative of stable operational performance. This positive trend suggests that Marathon Oil is generating ample cash from its operations, which is favorable for its financial health and potential for reinvestment.

Return on Assets (ROA) are growing?

The ROA criterion in the Piotroski Analysis evaluates the company's ability to generate profits from its assets. This measure is essential because a higher ROA signifies that the company is more efficiently managing its assets to produce earnings.

Historical change in Return on Assets (ROA) of Marathon Oil (MRO)

For Marathon Oil (MRO), the ROA decreased from 0.1956 in 2022 to 0.0787 in 2023. This is a significant drop, which means that Marathon Oil's efficiency in generating profits from its assets has substantially deteriorated. In absolute terms, a decreased ROA can be concerning as it signals declining efficiency. Comparing this to the industry median ROA, which has been relatively stable, adds an extra layer of concern. Therefore, based on this criterion, Marathon Oil would receive 0 points.

Operating Cashflow are higher than Netincome?

Piotroski's criterion stipulates that a company's operating cash flow should exceed its net income. This is crucial for evaluating the quality of earnings. When operating cash flow is higher than net income, it indicates that the company is generating sufficient cash flow to support its earnings, implying strong operational efficiency and financial health.

Historical accruals of Marathon Oil (MRO)

In 2023, Marathon Oil (MRO) reported an operating cash flow of $4,087 million, whereas its net income was $1,554 million. Clearly, the operating cash flow is significantly higher than the net income, adding 1 point under the Piotroski F-Score model. This trend is beneficial as it indicates robust financial health, with the company generating solid cash flows above its earnings level. Historically, the company has exhibited fluctuating yet generally strong operating cash flows compared to net income. For instance, in 2022, the cash flow from operations stood at $5,428 million versus a net income of $3,612 million. The pattern suggests consistency in the firm's ability to generate cash flow, granting an edge in reinvesting in its operations or distributing dividends.

Liquidity of Marathon Oil (MRO)

Leverage is declining?

Leverage is a financial ratio that indicates the relative proportion of a company's debt to its total assets. It is vital as higher leverage can signal higher risk.

Historical leverage of Marathon Oil (MRO)

Leverage for Marathon Oil (MRO) increased from 0.1726 in 2023 to 0.2769 in 2022. With a leverage rise, MRO's total debt proportion relative to its assets has grown, indicating added risk. Historically, Marathon Oil experienced a general upward leverage trend, peaking in 2022 before dropping in 2023. Comparing to its 20-year leverage data, this is a significant change. Thus, no point is added for decreased leverage in 2023 under the Piotroski score approach.

Current Ratio is growing?

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

Historical Current Ratio of Marathon Oil (MRO)

In 2023, Marathon Oil (MRO) reported a current ratio of 0.4001, a decrease from 0.7246 in 2022. This represents a reduction in liquidity over the past year, allocating a score of 0 for this criterion. Historically, Marathon Oil's current ratio has been declining and has remained below the industry median for the recent years. Such a trend might indicate emerging liquidity risks or inefficient management of current assets.

Number of shares not diluted?

The criterion examines whether the number of outstanding shares has decreased or increased. A decrease implies share buybacks, which can be positive.

Historical outstanding shares of Marathon Oil (MRO)

In 2022, Marathon Oil had 685 million outstanding shares, while in 2023, this number decreased to 607 million. This reduction in outstanding shares, descending by 78 million, is positive as it indicates a share buyback strategy. Over the past 20 years, Marathon Oil's outstanding shares have fluctuated but recent trends show a notable reduction, including a large drop from 847 million shares in 2016 down to 607 million in 2023, signaling a consistent effort at share reduction. Therefore, this criterion adds 1 point.

Operating of Marathon Oil (MRO)

Cross Margin is growing?

Change in Gross Margin is a measure of the company's ability to increase efficiencies and manage cost of goods sold. A higher gross margin over time is indicative of good management and profitability.

Historical gross margin of Marathon Oil (MRO)

Comparing the gross margin between 2022 and 2023 for Marathon Oil (MRO), we see a decrease from 0.5788 in 2022 to 0.4181 in 2023. This represents a decline and thus, no points are awarded for this criterion. Historically, the gross margin for MRO has fluctuated significantly, dipping heavily into negative territory during the 2013-2016 period, then rising afterward. In contrast, the industry median gross margin for 2023 stands at 0.4978, which is higher than MRO's 2023 figure, indicating a relatively weaker performance in gross margin efficiency compared to peers. Thus, Marina Oil must tighten its cost management strategies.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency with which a company uses its assets to generate sales revenue. An increasing Asset Turnover typically indicates improving utilization of assets to produce revenue, while a decreasing ratio suggests potential inefficiencies.

Historical asset turnover ratio of Marathon Oil (MRO)

Comparing the Asset Turnover of 0.3243 in 2023 with 0.4083 in 2022, it's clear there has been a decline. This decrease suggests Marathon Oil has become less efficient in using its assets to generate revenue compared to the previous year. Over the last 20 years, the Asset Turnover ratio has seen significant fluctuations with a peak in 2005 at 2.2711 and a trough in 2016 at 0.1272. The trend shows a general decline in asset efficiency over time with occasional rebounds, but the recent decline indicates challenges in maintaining asset effectiveness. Therefore, no point is added in this criterion.


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