O 55.75 (+1.36%)
US7561091049REITsREIT - Retail

Last update on 2024-06-05

Realty Income (O) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Realty Income (O) sees a 5/9 Piotroski F-Score for 2023, indicating moderate financial health with strengths in profitability and liquidity.

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.
Learn more...

Short Analysis - Piotroski Score: 5

We're running Realty Income (O) 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?
0
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

Realty Income (O) has a Piotroski F-Score of 5 out of 9. The company has positive net income and cash flow from operations, indicating profitability. It also shows strong operational efficiency with higher operating cash flow than net income. However, its return on assets (ROA) and gross margin have decreased. The company has improved its current ratio, reflecting better liquidity, but its leverage ratio has increased, and the number of outstanding shares has been diluted. Finally, the asset turnover ratio has seen a moderate increase.

Insights for Value Investors Seeking Stable Income

Given Realty Income's Piotroski F-Score of 5, the company shows some strengths like profitability and improved liquidity. However, there are concerns regarding its leverage increase, share dilution, and decreasing ROA and gross margin. While the stock has some positive attributes, the mixed performance suggests potential investors should conduct further research and consider these risks before investing.

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

Profitability of Realty Income (O)

Company has a positive net income?

Checking whether a company's net income is positive is crucial because it fundamentally indicates profitability. Positive net income reflects a company's ability to generate profit from its operations, a key factor for financial health.

Historical Net Income of Realty Income (O)

Realty Income (O) posted a net income of $872,309,000 in 2023, indicating a positive value. Over the past 20 years, the company's net income has generally trended upwards. In 2003, the net income was $86,435,000, and it steadily grew with minor fluctuations, reaching $872,309,000 in 2023. This trend is beneficial for the Piotroski F-score as a positive net income garners a point, reflecting strong financial performance. Therefore, for this criterion, Realty Income earns 1 point.

Company has a positive cash flow?

Positive Cash Flow from Operations underlines a firm's ability to generate sufficient cash to maintain and grow its operations. This is a key indicator of financial health and operational efficiency, reflecting the firm's capability to cover its operating costs.

Historical Operating Cash Flow of Realty Income (O)

Realty Income (O) has a positive Cash Flow from Operations (CFO) amounting to $2,958,769,000 in 2023, which adds 1 point in the Piotroski Analysis. Looking at the historical data, CFO has generally trended upwards over the past 20 years, starting from $73,957,000 in 2003 to nearly $3 billion in 2023. This consistent increase is a very positive sign, reflecting robust operational cash generation. The sharp rise in the last few years—from $1.32 billion in 2021 to nearly doubling in 2023—indicates a strong operational performance and increased efficiency, making it a highly favorable trend.

Return on Assets (ROA) are growing?

Change in ROA is a measure of a company's ability to generate profit from its assets compared to previous periods. It's crucial as it showcases the entity's operational efficiency over time.

Historical change in Return on Assets (ROA) of Realty Income (O)

For Realty Income (O), the ROA in 2023 is 0.0162, compared to 0.0187 in 2022, indicating a drop in ROA. This suggests a decrease in efficiency in using its assets to generate earnings. Therefore, no point is awarded. Additionally, comparing Realty Income's ROA to the industry median over the past 20 years, it is evident that Realty Income's ROA has consistently lagged behind, with the industry's median ROA ranging from 0.5516 to 0.7632. These figures highlight a significant discrepancy in operational efficiency.

Operating Cashflow are higher than Netincome?

This criterion evaluates whether a company's operating cash flow is greater than its net income. It is important to consider since it indicates that the company generates sufficient cash from its operations to cover its net income, signifying strong operational efficiency and cash management.

Historical accruals of Realty Income (O)

For Realty Income (O) in 2023, the operating cash flow stands at $2,958,769,000, while the net income is $872,309,000. Given that the operating cash flow is significantly higher than the net income, this criterion receives a score of 1. This trend is favorable as it indicates healthy profitability and strong cash flow generation within the company. Realty Income's ability to generate almost 3.39 times more cash from operations than its net income reinforces the company's operational robustness. Over the past two decades, Realty Income's cash flow from operations has shown a consistent upward trend, reflecting steady operational growth. Similarly, net income has also grown, albeit at a slower pace, showcasing a pattern of sound financial health. The accruals values suggest a controlled and manageable level of non-cash-based earnings, adding additional confidence in the quality of Realty Income's earnings. The long-term data reveals consistent growth in operating cash flows, emphasizing the company's resilient capacity to convert income into actual cash.

Liquidity of Realty Income (O)

Leverage is declining?

This criterion evaluates how the company's use of debt relative to its equity has changed over time.

Historical leverage of Realty Income (O)

Realty Income's leverage has increased from 0.3195 in 2022 to 0.3674 in 2023. This means that the leverage ratio has gone up, thus not meeting Piotroski's criterion for a leverage decrease, and as a result, it does not score a point on this basis. Historically, Realty Income's leverage has fluctuated, reaching a peak of 0.5008 in 2012 and hitting a notable low of 0.0549 in 2017. The increase this year suggests a growing reliance on debt financing, which could introduce higher financial risk if not managed properly.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets. An increasing Current Ratio indicates improving liquidity.

Historical Current Ratio of Realty Income (O)

In 2022, Realty Income (O) had a Current Ratio of 0.5068, which increased to 1.5326 in 2023. This indicates a significant improvement in the company's liquidity and its ability to meet short-term obligations. Given this substantial increase, this trend is considered favorable. When compared with the industry median Current Ratio, which was 0.8911 in 2022 and 1.1846 in 2023, Realty Income (O) not only improved its ratio but also surpassed the industry median in 2023. The increase in the Current Ratio by a factor of three essentially ensures the company’s better financial standing in the years to come, which demonstrates operational prudence. Therefore, for this Piotroski criterion, Realty Income secures 1 point.

Number of shares not diluted?

Evaluates changes in outstanding shares, assessing if a firm engages in dilution or buybacks. Increased shares can indicate dilution.

Historical outstanding shares of Realty Income (O)

Comparing Realty Income's outstanding shares, they rose from 611,766,000 in 2022 to 692,298,000 in 2023, implying a share increase. This trend is generally unfavorable under Piotroski criteria as it suggests potential dilution. Hence, Realty Income receives 0 points for this criterion. Examining the 20-year data, there's a consistent tendency to increase shares, peaking from 41,453,500 in 2021 to 69,229,800 in 2023, indicating persistent share issuance over two decades.

Operating of Realty Income (O)

Cross Margin is growing?

The criterion evaluates whether the company's gross margin has increased over the specified period, indicating improved efficiency in managing its cost of goods sold relative to its revenue, which is a positive sign for profitability.

Historical gross margin of Realty Income (O)

In the case of Realty Income (O), the Gross Margin has decreased from 0.9323 in 2022 to 0.9223 in 2023, resulting in a drop of approximately 1.07%. This decrease indicates a slight decline in efficiency when converting sales into gross profit. Examining the longer historical trend, Realty Income's gross margin, while still relatively high, has gradually come down from 0.9500 in 2015 to 0.9223 in 2023. In comparison to the industry median that stands at 0.7072 in 2023, Realty Income's gross margin is still significantly higher. However, the downward trend should be closely monitored by investors. Since the Gross Margin has decreased in 2023, this criterion yields 0 points.

Asset Turnover Ratio is growing?

Asset turnover is a measure of the efficiency with which a company uses its assets to generate sales revenue.

Historical asset turnover ratio of Realty Income (O)

Realty Income (O) saw a modest increase in its asset turnover ratio from 0.0721 in 2022 to 0.0759 in 2023. This translates to an improvement in the efficiency with which the company utilizes its assets to generate revenue. Historically, the company's asset turnover has experienced a declining trend, dipping significantly since 2003 when it was 0.1279. Hence, this marginal increase in 2023 can be considered positive, adding 1 point to the Piotroski score. However, it is crucial to acknowledge the long-term declining trend, implying persistent challenges in efficiently leveraging its assets. In summary, while the yearly uptick is good, sustained improvement is essential.


Obligatory risk notice

We would like to point out that the contents of this website are for general information purposes only and do not constitute recommendations for the purchase or sale of specific financial instruments, and therefore do not constitute investment advice. In particular, marketstorylabs.com and its creators cannot assess the extent to which information / recommendations made on the pages correspond to your investment objectives, your risk tolerance and your ability to bear losses. Therefore, if you make any investment decisions based on information on the site, you do so solely on your own responsibility and at your own risk. This in turn means that neither marketstorylabs.com nor its creators are liable for any losses incurred as a result of investment decisions based on the information on the marketstorylabs.com website or other media used.