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Last update on 2024-06-06

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

Analyze NVR's Piotroski F-Score with a final score of 5/9 for 2023. Understand financial health indicators, including profitability, liquidity, and efficiency.

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 NVR (NVR) 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?
0
Leverage is declining?
1
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 rates a company's financial health from 0 to 9 based on profitability, liquidity, and operating efficiency. For NVR, Inc. (NVR), the F-Score is 5. Out of the nine criteria, NVR is strong in profitability and liquidity but has mixed results in operating efficiency. Key points include 20 years of consistent positive net income, stable and positive cash flow, an improved Current Ratio, and reduced leverage. However, Return on Assets has decreased, operating cash flow did not exceed net income, Gross Margin fell, and Asset Turnover declined in 2023. Evaluating these with a broader context shows NVR as a financially sound but not exceptionally high-performing company in recent times.

Insights for Value Investors Seeking Stable Income

Given the mixed results, NVR appears to be a stable investment but not a spectacular one at the moment. If you're a value investor looking for long-term stability with some consistent profitability, NVR might be worth your consideration. However, for those seeking high growth or exceptional efficiency, it might not meet those criteria based on the current and recent performance indicators.

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

Profitability of NVR (NVR)

Company has a positive net income?

Net income is a critical indicator of a company's profitability. In the Piotroski Analysis, positive net income signals financial health, adding 1 point to the score.

Historical Net Income of NVR (NVR)

With a net income of $1,591,611,000 in 2023, NVR's net income is clearly positive, warranting an additional point in the Piotroski Analysis. Looking at the historical data, NVR has maintained a positive net income for the last 20 years, showcasing consistent profitability. Especially notable is the progression from $419,791,000 in 2003 to $1,591,611,000 in 2023. The peak net income was $1,725,575,000 in 2022, slightly higher than the current year, suggesting robust but slightly tapering profitability.

Company has a positive cash flow?

Checking the Cash Flow from Operations (CFO) helps to assess a company's ability to generate cash from its core business operations, which is vital for sustaining and growing the business.

Historical Operating Cash Flow of NVR (NVR)

The Cash Flow from Operations (CFO) for NVR in 2023 is $1,497,993,000 which is positive. This indicates good financial health as the company is generating sufficient cash from its core operating activities. Over the last 20 years, the CFO has shown a general upward trend with only slight variations, suggesting a strong and stable operational performance. This positive trend is particularly notable for financial analysts as it demonstrates the company’s efficient cash flow management. Hence, NVR earns a full point for this criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures the company's ability to increase profit generation relative to its asset base. It is a key indicator for evaluating management efficiency.

Historical change in Return on Assets (ROA) of NVR (NVR)

The ROA for NVR decreased from 0.3002 in 2022 to 0.2596 in 2023. Hence, the Piotroski score for this criterion is set to 0, indicating a decline in asset utilization efficiency. Despite the notable decrease, it is pertinent to compare the industry's median ROA – which was 0.2544 in 2022 and 0.244 in 2023 – suggesting that although NVR's ROA has declined, it still outperforms the industry median significantly.

Operating Cashflow are higher than Netincome?

comparison between operating cash flow and net income is crucial for understanding the quality of a company's earnings, especially whether those earnings are backed by actual cash flow.

Historical accruals of NVR (NVR)

For the year 2023, NVR's operating cash flow stands at $1,497.99 million, compared to its net income of $1,591.61 million, leading to a 0 point in the Piotroski F-Score. While a point is not awarded here, this should not immediately raise red flags as several factors could cause this discrepancy, including significant non-cash items or changes in working capital. Long-term trends also reveal that in 12 out of the past 20 years, operating cash flow has exceeded net income, suggesting that NVR generally has a solid record of converting earnings into cash. However, investors should monitor why this trend has reversed in 2023. Especially considering accrual ratios like 0.2269 in 2023—the highest it has been in years. A sudden rise in accruals can sometimes signal aggressive revenue recognition practices or other financial shenanigans like channel stuffing. Altogether, this criterion results in a 0 point for the current analysis year, but the broader historical context of NVR’s financials remains robust.

Liquidity of NVR (NVR)

Leverage is declining?

Change in Leverage measures the company's change in financial risk. Lower leverage means less debt and is generally positive.

Historical leverage of NVR (NVR)

The Leverage of NVR (NVR) increased from 0.178 in 2022 to 0.1536 in 2023, indicating a decrease of 13.7%. This is a positive sign as lower leverage indicates reduced financial risk for the company. For further historical context, the peak leverage over the last 20 years was 0.2752 in 2020, whereas the lowest was 0.0009 in 2009. Therefore, in line with the Piotroski F-Score evaluation methodology, NVR scores 1 point for favorable change in leverage.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. An increase indicates improved liquidity and financial health.

Historical Current Ratio of NVR (NVR)

In 2023, NVR's Current Ratio improved to 4.9019 from 4.5325 in 2022. This uptick, scoring a point in Piotroski analysis, speaks to better liquidity and robustness in meeting short-term obligations. Historically, from 2003-2023, NVR had been trending towards a stronger liquidity position, peaking at 4.9578 in 2020 before the slight dip in subsequent years. Compared to the industry median, which stands at 5.5847 in 2023, NVR's ratio falls short but shows a solid and improving trajectory, underlining sound management of current assets and liabilities. Ultimately, this increase is a positive indicator.

Number of shares not diluted?

Change in Shares Outstanding measures the company’s shares issued to the public. Analyzing these changes can signal management’s confidence and shareholder dilution effects.

Historical outstanding shares of NVR (NVR)

The Outstanding Shares for NVR, Inc. were 3,286,000 in 2022 and increased to 3,238,000 in 2023, leading to an increase in outstanding shares, resulting in a score of 0. Over 20 years, the outstanding shares trend shows a significant reduction from 8,674,000 shares in 2003 to the latest 3,238,000 in 2023, indicating strong buyback activity. Since 2019 with 3,641,000 and moving downward, buybacks have been generally consistent until a slight increase recently. However, this minor uptick could raise expectations about future dilution but must be viewed in the context of historical buyback trends. The overall long-term trend is positive.

Operating of NVR (NVR)

Cross Margin is growing?

Gross Margin measures a company's financial health and ability to manage production costs. An increase shows efficiency in cost management and better profitability.

Historical gross margin of NVR (NVR)

In 2023, NVR's Gross Margin stands at 0.2605 compared to 0.2729 in 2022, indicating a decrease. Over the last 20 years, NVR's Gross Margin has shown significant variability, with a low of 0.1386 in 2008 and a peak at 0.2914 in 2005. While 2023's figure surpasses its 20-year low and remains competitive, it doesn't improve from 2022's Gross Margin. However, it is notably higher than the industry's median gross margin of 0.244. This trend suggests a challenging environment or possible inefficiencies in cost control, earning 0 points for this criterion.

Asset Turnover Ratio is growing?

The Asset Turnover ratio is a financial metric that measures the efficiency of a company in using its assets to generate sales. A higher ratio indicates better performance.

Historical asset turnover ratio of NVR (NVR)

In 2023, the Asset Turnover ratio for NVR stood at 1.5551 compared to 1.8335 in 2022. This reflects a decrease in the company's efficiency in utilizing its assets to generate revenue. Over the last 20 years, the Asset Turnover ratio has shown fluctuating trends, peaking at 2.8896 in 2003 and gradually declining to its current level. This trend suggests that NVR, while initially highly efficient in asset utilization, has seen diminishing returns over the years. For the Piotroski analysis, this results in setting the point to 0 as the Asset Turnover has decreased.


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