Last update on 2024-06-06

Newell Brands (NWL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Analyze Newell Brands' (NWL) Piotroski F-Score for 2023. Find out its profitability, liquidity, and operational health. Final score: 3/9.

Short Analysis - Piotroski Score: 3

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

Newell Brands (NWL) has been analyzed using the Piotroski nine-criteria scoring system, resulting in a score of 3 out of 9. Key profitability metrics reveal problems: the company had a negative net income of -$388 million but did produce a positive cash flow of $930 million. On the operational side, Newell's Return on Assets (ROA) has declined to -0.0305, and although operating cash flow was higher than net income, suggesting solid core operations, recent leverage has increased while current ratio and gross margin have both decreased. A marginal share reduction is noted positively.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski score of 3, Newell Brands appears to be struggling with several key metrics indicating poor financial health. The negative net income, and declining ROA are red flags, and increased leverage suggests rising financial risks. While the company’s ability to generate positive cash flow is a good sign, overall, the low Piotroski score implies that potential investors should be cautious and consider other investment options or further scrutiny before committing. Investing in Newell Brands right now might not be advisable given its current financial struggles.

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

Profitability of Newell Brands (NWL)

Company has a positive net income?

Net income measures a company's total earnings (or losses) over a specific period and is a key profitability metric.

The net income for Newell Brands (NWL) in 2023 is -$388 million, translating to a negative result. Historically, Newell has experienced fluctuations in its net income over the last 20 years, with highs and lows reflecting profitability in certain periods and losses in others. The recent negative net income is alarming considering previous volatility. With a streak of losses and only one profitable year (2021) recently out of the last five, this trend does not bode well for Newell. Financial health metrics like net income warrant careful scrutiny from investors, particularly in companies showing interspersed profit and loss years. Overall, this results in a score of 0 for net income in Piotroski Analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's regular operating activities. Positive cash flow indicates a company can sustain its operations without needing external financing, making it crucial for assessing financial health.

Newell Brands' CFO in 2023 stands impressively at $930,000,000, clearly in the positive territory. Given that this criterion requires a positive CFO for a point addition, Newell Brands earns 1 point here. Historically, the company has been consistent in generating positive cash flows, apart from a slight dip into the negative in 2021 (-$272,000,000). The consistent trend from 2003 to 2023, with most years showcasing robust cash flows, signifies a solid operational foundation. This positive trend, especially the recovery from 2021 to 2023, underscores Newell Brands' resilience and ability to manage its finances effectively, contributing positively to its overall financial health and attractiveness to investors.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures how efficiently a company is using its assets to generate profits. It is a critical metric in assessing management's effectiveness.

In 2022, Newell Brands' ROA was positive at 0.0143, indicating the company was somewhat effective in using its assets to generate profit. However, in 2023, the ROA dropped to -0.0305, signaling a shift towards inefficiency and poor management of assets. To contextualize, over the last 20 years, Newell Brands' operating cash flow has shown variability, with peaks such as $1.83 billion in 2016 but dropping to -$272 million in 2022. Meanwhile, the industry median ROA has consistently performed well, generally hovering around the 0.50 mark. This substantial decline in ROA from 2022 to 2023 not only reflects internal issues within Newell Brands but also puts the company notably below its industry peers. Therefore, for this criterion, Newell Brands scores 0 points as the decrease in ROA is not favorable.

Operating Cashflow are higher than Netincome?

Operating cash flow (OCF) being higher than net income suggests the core business is generating ample cash, making it a crucial metric.

For Newell Brands (NWL) in 2023, the operating cash flow is USD 930 million, whereas the net income is a negative USD 388 million. This indicates that Newell's core operations are healthy since the company is generating substantial cash despite recording a net loss. The trend in OCF over the last 20 years shows variability, with figures ranging from substantial highs of over USD 1.4 billion to lows of a negative figure in 2020. Nevertheless, a positive OCF compared to net income merits a score of 1 in the Piotroski analysis, reflecting a robust operational cash generation capability, even in challenging times.

Liquidity of Newell Brands (NWL)

Leverage is declining?

Change in Leverage refers to the difference in the ratio of a company's debt to its equity between two periods. A decrease indicates improved financial health.

Comparing Newell Brands' leverage ratio of 0.3972 in 2022 to 0.4128 in 2023, it is evident that leverage has increased in 2023. This increase in leverage indicates that the company has become more reliant on debt financing compared to the previous year, hinting at potential financial risk. Historically, Newell Brands' leverage has fluctuated. For instance, from a low of 0.1792 in 2007, it spiked to 0.378 in 2018 and now has increased further in 2023. This trend may concern investors and analysts who prefer companies with stable or decreasing leverage ratios.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with its short-term assets. This is a key liquidity criterion.

Comparing the Current Ratios for Newell Brands in 2023 and 2022 indicates a decrease from 1.3164 in 2022 to 1.1577 in 2023. This decrease signifies a decline in liquidity and short-term financial health. Additionally, the 2023 Current Ratio falls below the industry median of 1.5029. Hence, this criterion scores 0 points.

Number of shares not diluted?

The change in shares outstanding measures whether a company has issued new shares or bought back shares in the market.

Comparing the Outstanding Shares of 415,700,000 in 2022 with 414,100,000 in 2023, we observe a marginal decrease by 1,600,000 shares. As per Piotroski's criteria, reducing the number of outstanding shares indicates shareholder-friendly actions such as buybacks, leading to a score of 1. Over the last 20 years, Newell Brands' share count has seen fluctuations but the recent decrease is a positive trend.

Operating of Newell Brands (NWL)

Cross Margin is growing?

The change in Gross Margin measures a company's ability to improve its production efficiency, cost management, and/or pricing strategy. An increasing Gross Margin typically signifies better financial health and operational efficacy, making it a crucial factor in the Piotroski Analysis.

For Newell Brands (NWL), the Gross Margin decreased from 0.2996 in 2022 to 0.2893 in 2023, resulting in a reduction. This represents a less favorable trend. Historically, NWL's Gross Margin had been higher, for instance, peaking at 0.3896 in 2015. When compared to the industry median Gross Margin of 0.4411 in 2023, NWL's margin is significantly lower. The diminishing Gross Margin might indicate rising production costs, pricing pressures, or inefficiencies that need to be addressed. Considering these factors, this criterion does not add a point for 2023.

Asset Turnover Ratio is growing?

The asset turnover ratio measures the efficiency of a company's use of its assets in generating sales revenue.

For Newell Brands (NWL), the asset turnover ratio decreased from 0.6872 in 2022 to 0.6398 in 2023. This signifies a reduced efficiency in utilizing assets to generate revenue, equating to a score of 0 for this Piotroski criterion. Historically, since 2003, NWL's asset turnover has shown substantial fluctuations, peaking at 1.0424 in 2003 and reaching its lowest point at 0.3395 in 2018.