Last update on 2024-06-06

Newmont (NEM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Explore Newmont's (NEM) financial health with a Piotroski F-Score analysis for 2023, revealing a final score of 3/9 based on crucial profitability, liquidity, and efficiency metrics.

Short Analysis - Piotroski Score: 3

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

The Piotroski F-Score evaluates the strength of Newmont's (NEM) financial position based on criteria related to profitability, liquidity, and operational efficiency. For 2023, Newmont's F-Score is 3 out of 9, indicating potential concerns in its financial health. The company has positive cash flow and operational cash flow higher than net income, earning points in these areas. However, Newmont posted a significant net loss, a declining return on assets, a lower current ratio, increased share dilution, a reduced gross margin, and lesser asset turnover ratio, which negatively impact its overall score.

Insights for Value Investors Seeking Stable Income

Given the Piotroski F-Score of 3, Newmont (NEM) appears to have several financial challenges, especially in profitability and efficiency. While the company shows strong cash flow generation and reduced leverage, potential investors should be cautious and conduct further research into the causes of the declining profitability metrics and liquidity concerns before making any investment decisions. This low score suggests that Newmont may not be a strong, undervalued investment at this time.

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

Profitability of Newmont (NEM)

Company has a positive net income?

The Piotroski score assigns 1 point if a company's net income for the current year is positive, reflecting profitability.

For Newmont (NEM), the net income for 2023 stands at a concerning -$2.494 billion. This negative net income does not earn the company a point in the Piotroski analysis, keeping the score at 0 for this criterion. Reviewing historical data, Newmont has experienced fluctuations in profitability over the past two decades. For instance, while it posted high net incomes in years like 2019 ($2.805 billion) and 2010 ($2.277 billion), it also recorded significant losses in 2007 (-$1.886 billion), 2013 (-$2.462 billion), 2022 (-$429 million), and now in 2023. This volatility could be indicative of the cyclical nature of the mining industry and variable operational costs, making it essential for potential investors to cautiously evaluate its profitability trends.

Company has a positive cash flow?

Positive CFO indicates a company's ability to generate sufficient cash flow from its core business activities, signaling financial health.

Newmont's CFO for 2023 stands at $2,763,000,000, which is positive. This earns the company 1 point according to the Piotroski Score criteria. Examining historical data, we observe a fluctuating cash flow trend. Despite some variability, Newmont consistently generated positive cash flows over the past 20 years, peaking in 2020 with $4,882,000,000. This sustained performance illustrates Newmont's robust operational capabilities, even amidst potential market volatility. The positive 2023 CFO reinforces the company's financial stability and operational efficiency.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is a key metric for evaluating the relative efficiency of a company’s ability to generate profit from its assets. In the Piotroski Score, an increasing ROA typically indicates improved operational efficiency and profitability, warranting a score of 1 point.

In the case of Newmont (NEM), the Return on Assets (ROA) decreased from -0.0109 in 2022 to -0.0531 in 2023. This downward trend indicates a decline in the company's efficiency in generating profit from its assets, which is a negative signal. As a result, Newmont does not earn a point for this criterion.

Operating Cashflow are higher than Netincome?

Operating Cash Flow being higher than Net Income indicates that a company is generating more cash than accounting profit, suggesting strong operational efficiency and earnings quality.

In 2023, Newmont (NEM) reported an Operating Cash Flow of $2.763 billion compared to a Net Income of -$2.494 billion. This results in Operating Cash Flow being significantly higher than Net Income. This is a positive indicator as it demonstrates that the company has robust cash-generating ability from its core operations, despite reporting a net loss. The consistency of Operating Cash Flow over the past 20 years, with only some fluctuations, further emphasizes the strength of its operational efficiency. Thus, 1 point is awarded under this criterion.

Liquidity of Newmont (NEM)

Leverage is declining?

Leverage measures the extent to which a company uses debt financing relative to equity financing. In the context of the Piotroski Analysis, a decrease in leverage indicates a reduced financial risk and is viewed positively.

Newmont's leverage decreased from 0.1569 in 2022 to 0.1333 in 2023. This decrease in leverage is a positive trend as it implies a reduction in the company's financial risk, thereby improving its financial stability. Reviewing the last 20 years of leverage data, Newmont's leverage peaked at 0.2601 in 2014 and saw a general downward trend post-2015, reflecting effective financial management. Therefore, this criterion adds 1 point.

Current Ratio is growing?

The Current Ratio is an indicator of a company’s ability to pay its short-term obligations with its short-term assets. A higher ratio is better.

The Current Ratio for Newmont (NEM) has decreased from 2.2266 in 2022 to 1.2524 in 2023, thus earning 0 points according to the Piotroski criteria. This decline signals a reduced ability for Newmont to cover its short-term liabilities with its short-term assets compared to the previous year. Over the last 20 years, Newmont's Current Ratio has shown variations but generally performed below the industry median in 2023, suggesting a potentially weaker liquidity position relative to the broader sector.

Number of shares not diluted?

Change in shares outstanding evaluates if the company is repurchasing shares or issuing new ones. A decrease is often positive, indicating potential share buybacks, while an increase might dilute shareholder value.

In 2022, Newmont had 794,000,000 outstanding shares, which rose to 841,000,000 in 2023. This increase of 47,000,000 shares signifies that the company issued new shares, setting the score to 0 for this criterion. Historically, Newmont's outstanding shares have shown a general uptrend over the past 20 years, indicating periodic share issuance; particularly large increases are noted in 2019 and 2023, diluting shareholder value.

Operating of Newmont (NEM)

Cross Margin is growing?

Gross Margin is crucial as it highlights how efficiently a company is producing and selling its products. A higher gross margin indicates a more efficient production process.

The Gross Margin for Newmont decreased from 0.2738 in 2022 to 0.2544 in 2023, indicating a point loss of 0 for this criterion. Over the past 20 years, we observe significant fluctuations in Newmont's Gross Margin. For instance, it peaked at 0.6348 in 2010, while the lowest point was at 0.2132 in 2013. Comparatively, the industry's median Gross Margin also experiences fluctuations but maintained a steadier trajectory. The difference between Newmont's Gross Margin (0.2544) and the industry median (0.2884) in 2023 suggests room for improvement.

Asset Turnover Ratio is growing?

Asset Turnover measures a firm's efficiency in using its assets to generate sales revenue.

In 2023, Newmont's Asset Turnover ratio was 0.2514, compared to 0.3015 in 2022. This indicates a decrease, suggesting that Newmont was less efficient in utilizing its assets to generate revenue in 2023. Hence, this criteria scores a 0. Historical data shows fluctuations but staying below 0.40 since 2009.