NTCT 18.19 (-0.66%)
US64115T1043SoftwareSoftware - Infrastructure

Last update on 2024-06-07

NetScout Systems (NTCT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

In-depth Piotroski F-Score analysis for NetScout Systems (NTCT) in 2023. Discover the financial health, liquidity, and profitability scores (8/9).

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: 8

We're running NetScout Systems (NTCT) 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?
1
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 measures the financial strength of a company based on criteria involving profitability, liquidity, and leverage, with a score ranging from 0 to 9. NetScout Systems (NTCT) achieves an impressive Piotroski Score of 8 out of 9, indicating strong financial health: 1. **Profitability:** NetScout has a positive net income in 2023 ($59.648M) and positive cash flow ($156.65M), with an increasing return on assets (ROA). Operating Cash Flow is higher than Net Income, indicating high-quality earnings. 2. **Liquidity:** The company has managed to decrease its leverage but has seen a decline in its current ratio, which could be concerning for its short-term financial obligations. 3. **Operating Efficiency:** NetScout's gross margin and asset turnover ratio have both increased, showing better profitability and efficiency in asset utilization. Additionally, the number of outstanding shares has decreased, which is favorable for existing shareholders.

Insights for Value Investors Seeking Stable Income

Based on the high Piotroski Score of 8, NetScout Systems (NTCT) appears to be a strong, stable company, suggesting a possibly undervalued investment opportunity. It shows solid operational and financial strength, particularly in generating and managing its cash flows effectively. However, caution is advised due to the drop in the current ratio, indicating potential liquidity issues in short-term obligations. Investors should consider studying the company in more detail, checking recent quarterly reports, and comparing it with industry benchmarks before making a decision.

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

Profitability of NetScout Systems (NTCT)

Company has a positive net income?

The Piotroski F-Score assigns a point if the company’s net income is positive, reflecting the company’s profitability.

Historical Net Income of NetScout Systems (NTCT)

For 2023, NetScout Systems (NTCT) reports a net income of $59,648,000, indicating a positive trend. Over the past two decades, the company has experienced significant volatility in its net income, including negative figures in several years (e.g., -$73,324,000 in 2019 and -$28,369,000 in 2016). While the periods of negative income warrant caution, the positive net income in 2023 contributes positively to the Piotroski F-Score. Given this steady improvement over the last three years, the net income criterion adds 1 point, reflecting profitability and a healthy business trend.

Company has a positive cash flow?

One of the key criteria when evaluating a company's financial health using the Piotroski F-Score is whether the cash flow from operations is positive.

Historical Operating Cash Flow of NetScout Systems (NTCT)

For the year 2023, the Cash Flow from Operations (CFO) for NetScout Systems (NTCT) stands at a positive $156.65 million. This is a good trend for the given criterion and earns the company 1 point in the Piotroski analysis. Historically, NetScout has managed to maintain positive CFO over the last 20 years, showcasing a trend of robust operational performance. The only years where cash flows significantly surged were 2017 and 2018, reaching over $200 million, but the consistency over these two decades is a strong indicator of well-managed operations and reliable cash generation capabilities. Therefore, this continuous positive trend reinforces investor confidence in the company's operational efficiency.

Return on Assets (ROA) are growing?

Change in ROA measures the return of profit relative to the company's assets year-over-year.

Historical change in Return on Assets (ROA) of NetScout Systems (NTCT)

For NetScout Systems (NTCT), the Return on Assets (ROA) increased from 0.0114 in 2022 to 0.0198 in 2023. This ascension attributes 1 point to this criterion, indicating a positive profitable turn in terms of asset utilization. A rising ROA signals that the company generates higher earnings from its assets compared to the previous year. The change is significant as it can lead to better investor confidence. Moreover, analyzing the provided historical data, the most recent ROA of 0.0198 is still far below the 2023 industry median ROA of 0.715, suggesting that although NetScout Systems shows improving efficiency, it trails behind its industry counterparts significantly in asset profitability.

Operating Cashflow are higher than Netincome?

This criterion ensures that the company generates sufficient cash from its operations to sustain its business activities, indicating a higher quality of earnings.

Historical accruals of NetScout Systems (NTCT)

In 2023, NetScout Systems (NTCT) reported an Operating Cash Flow (OCF) of $156.65 million compared to a Net Income of $59.648 million. This sets the score at 1, as the Operating Cash Flow, which stands at more than twice the Net Income, suggests strong cash generation from the core operating activities. Over the last 20 years, NetScout consistently saw an overall upward trend in Operating Cash Flow, spiking to $296 million in 2022 and then adjusting to $156.65 million in 2023. Compared to its past, this is a robust indicator, affirming that despite fluctuations, the company remains fundamentally sound in converting its sales into cash. The periodic higher Operating Cash Flow than Net Income minimizes concerns about income statement manipulations and underscores sound cash management practices.

Liquidity of NetScout Systems (NTCT)

Leverage is declining?

Change in leverage evaluates whether a company is managing its debt levels effectively. A decreasing leverage points to debt reduction and potentially a healthier financial state.

Historical leverage of NetScout Systems (NTCT)

NetScout Systems has shown a decrease in leverage from 0.1264 in 2022 to 0.0528 in 2023, indicating effective management of debt levels. Over the last 20 years, the leverage values have fluctuated, peaking in 2008 at approximately 0.2197 and seeing significant variances since then. The recent trend of decreasing leverage is a positive sign of financial stability and operational efficiency. Given the decrease, NetScout Systems earns 1 point for this criterion in the Piotroski Analysis.

Current Ratio is growing?

The current ratio is crucial as it measures a company's ability to pay short-term obligations with short-term assets. A number less than one might indicate liquidity issues.

Historical Current Ratio of NetScout Systems (NTCT)

In 2023, NetScout Systems (NTCT) saw its current ratio decrease significantly from 1.9362 in 2022 to 1.361. This marks a substantial decline and sets the Piotroski score for this criterion to 0. Over the last 20 years, NetScout's current ratio has exhibited a volatile trend. Despite a dip below industry median in 2008, it generally remained above it until this drastic drop. The industry's current ratio median in 2023 stands at 1.5348, higher than NetScout's, suggesting potential liquidity concerns compared to industry peers.

Number of shares not diluted?

Changes in the number of outstanding shares can affect a company's valuation and shareholder value. A decrease often signifies shareholder affinity.

Historical outstanding shares of NetScout Systems (NTCT)

Based on the data, NetScout Systems (NTCT) had 74,019,000 outstanding shares in 2022 and 71,781,000 in 2023, indicating a decrease of 2,238,000 shares, equating approximately to a 3% reduction. This trend is positive for existing shareholders as it often leads to higher earnings per share and could indicate management's commitment to increasing shareholder value. Over a 20-year period, outstanding shares grew significantly with peaks around 2016-2017, likely due to acquisitions or stock issuance. The recent decrease resumes the positive trend seen in earlier years with more controlled outstanding shares.

Operating of NetScout Systems (NTCT)

Cross Margin is growing?

Change in Gross Margin: Compare the Gross Margin of 0.7561 in 2023 with the Gross Margin of 0.7497 in 2022 and check if Gross Margin increased or decreased. If the Gross Margin increased in 2023 add 1 point if not set it to 0.

Historical gross margin of NetScout Systems (NTCT)

For NetScout Systems (NTCT), the Gross Margin in 2023 stands at 0.7561 whereas in 2022, it was 0.7497. This slight increase in Gross Margin indicates a positive shift in the company's profitability, suggesting better cost management or pricing strategies that have elevated its Gross Margin. Over the last 20 years, NetScout has exhibited a generally stable Gross Margin trend, maintaining values close to or exceeding the industry median most of the time. For instance, the Gross Margin was 0.7509 in 2003, which is slightly lower than the 2023 figure, showcasing stability and gradual improvement over the years. The industry median in 2023 being 0.715 further underscores NetScout's superior efficiency in their operations relative to industry peers. Therefore, with this improvement in 2023, NetScout gains 1 point in the Piotroski analysis for the increase in its Gross Margin.

Asset Turnover Ratio is growing?

Asset Turnover measures how efficiently a company uses its assets to generate sales.

Historical asset turnover ratio of NetScout Systems (NTCT)

The Asset Turnover ratio for NetScout Systems (NTCT) increased from 0.2725 in 2022 to 0.3041 in 2023. This positive change signifies that the company has become more efficient in utilizing its assets to generate revenues over the past year, resulting in an increase by approximately 11.6%. Historically, however, the company's Asset Turnover ratio has seen a decline when compared to the higher ratios in the early 2000s. For instance, the Asset Turnover ratio in 2005 was 0.5929, indicating a more effective asset utilization compared to recent years. Nonetheless, the upward trend in 2023 is a favorable indicator after a period of lower ratios, thus scoring a point on this criterion.


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