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Last update on 2024-06-06

OReilly Automotive (ORLY) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Piotroski F-Score analysis for OReilly Automotive (ORLY) in 2023. Assessing 9 financial metrics, ORLY achieved a score of 7/9, indicating strong performance.

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: 7

We're running OReilly Automotive (ORLY) 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?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score is a measure of a company's financial strength and ranges from 0 to 9. The analysis for O'Reilly Automotive (ORLY) reveals a Piotroski score of 7, indicating a strong financial position. The company shows solid profitability, with positive net income and cash flow from operations, and high-quality earnings. However, areas such as Return on Assets and Leverage have room for improvement, with ROA being lower than the industry median and leverage increasing over the past years. Current Ratio has seen minimal improvement but still remains below industry standards, signaling potential liquidity risks. Asset Turnover and Gross Margin have improved, reflecting better operational efficiency. Finally, the decrease in outstanding shares adds a positive note to the company's financial health.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis of 7 out of 9, O'Reilly Automotive (ORLY) appears to be a strong and financially sound investment. The company demonstrates good profitability and efficient operations backed by high-quality earnings and a positive historical trend. Nonetheless, potential investors should be cautious about the increased leverage and low current ratio, which could indicate some financial risks. Overall, ORLY seems to be a worthwhile stock for investors seeking robust financial health and sustainable returns.

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

Profitability of OReilly Automotive (ORLY)

Company has a positive net income?

Net income measures a company's profitability over a period of time, showing whether it is making a profit or incurring a loss.

Historical Net Income of OReilly Automotive (ORLY)

The net income for O'Reilly Automotive (ORLY) in 2023 is $2,346,581,000. This indicates the company is profitable. Comparing past data, we see an upward trajectory in net income from $100,087,000 in 2003 to $2,346,581,000 in 2023. ORLY experiences continuous profitability growth. Point = 1.

Company has a positive cash flow?

Cash Flow from Operations (CFO) evaluates the cash a company produces from its regular business operations. Positive CFOs indicate profitability and efficient operations.

Historical Operating Cash Flow of OReilly Automotive (ORLY)

In 2023, O'Reilly Automotive (ORLY) reported a Cash Flow from Operations (CFO) of $3,034,084,000, which is positive. This signifies that the company is generating substantial cash from its core business activities. Examining the last 20 years, it is clear that ORLY has consistently improved its cash flow from operations moving from $172,841,000 in 2003 to $3,034,084,000 in 2023. This upwards trajectory in CFO highlights ORLY's strong operational efficiency and sustained profitability, which is a favorable indicator based on the Piotroski criteria.

Return on Assets (ROA) are growing?

Explain the criterion for OReilly Automotive (ORLY) and why it is important to consider

Historical change in Return on Assets (ROA) of OReilly Automotive (ORLY)

The Return on Assets (ROA) decreased slightly from 0.1785 in 2022 to 0.1771 in 2023. This decrease is minor but worth noting. Comparing with the industry median ROA, ORLY's ROA is significantly lower than the median, which was 0.3785 in 2023. This signifies that ORLY needs to reassess its asset utilization efficiency to align more closely with industry standards. Thus, for Piotroski analysis, 0 points are awarded.

Operating Cashflow are higher than Netincome?

Operating cash flow greater than net income indicates high-quality earnings. It signifies that a company's earnings are being backed up by strong cash flow, suggesting that the profits are not merely a result of accounting adjustments but are supported by real cash inflows.

Historical accruals of OReilly Automotive (ORLY)

For 2023, O'Reilly Automotive (ORLY) has an operating cash flow of $3,034,084,000 compared to a net income of $2,346,581,000. Clearly, the operating cash flow exceeds the net income, resulting in a positive accruals or non-cash adjustments basis. This trend indicates a strong cash generation capacity and high-quality earnings, affirming that the company's reported profits are robust and backed by actual cash flow. In cash flow from operations, ORLY has shown consistent growth over the last two decades, going from $172,841,000 in 2003 to $3,034,084,000 in 2023, while net income has grown from $100,087,000 in 2003 to $2,346,581,000 in 2023. This historical consistency further underscores the financial health of the company. Thus, ORLY earns 1 point for this criterion.

Liquidity of OReilly Automotive (ORLY)

Leverage is declining?

Change in Leverage compares the total debt to the total equity of a company to assess its financial stability. Decreasing leverage is preferred.

Historical leverage of OReilly Automotive (ORLY)

In 2022, ORLY had a leverage ratio of 0.4893, which increased to 0.5371 in 2023. This increase in leverage denotes a higher reliance on debt, signaling a potential risk increase; thus, ORLY scores 0 points. Over the last 20 years, leverage has mainly been on an upward trend, indicating a greater dependency on debt financing, particularly since 2017, when leverage increased significantly, jumping from 0.2619 in 2016 to 0.4282 in 2018. This steady rise since 2017 reflects strategic financial decisions or market conditions increasing net debt.

Current Ratio is growing?

Current Ratio is a financial metric that measures a company's ability to cover its short-term liabilities with its short-term assets. It is crucial in assessing a company's liquidity and overall financial health.

Historical Current Ratio of OReilly Automotive (ORLY)

In 2023, O'Reilly Automotive's (ORLY) Current Ratio was 0.7255, slightly up from 0.7147 in 2022. This increase, though marginal, earns the company one point under the Piotroski F-Score. However, it's essential to note that both values remain well below the industry median, which has hovered around 1.55 in recent years. Despite the increase, this low current ratio implies potential liquidity risks, reflecting the company's strategy of minimizing working capital for higher returns. Historically, O'Reilly's current ratio has steadily declined from a high of 2.7962 in 2003. Therefore, while the uptick in 2023 is a positive signal, it should be viewed in the broader context of the company’s long-term trend and strategy.

Number of shares not diluted?

This criterion compares the change in outstanding shares year-over-year, reflecting how a company manages its equity base. A reduction generally suggests a focus on increasing shareholder value.

Historical outstanding shares of OReilly Automotive (ORLY)

In the case of O'Reilly Automotive (ORLY), the outstanding shares decreased from 64,372,000 in 2022 to 60,475,000 in 2023. For this criterion, a decrease in outstanding shares suggests that the company is actively repurchasing its shares, which is a positive sign as it indicates management's confidence in the company's intrinsic value and prioritizes returning value to shareholders. Given the reduction, ORLY receives 1 point. Historical data show a consistent trend of share buybacks over the last 20 years, which underscores long-term managerial commitment to shareholder value.

Operating of OReilly Automotive (ORLY)

Cross Margin is growing?

Gross Margin is the percentage of revenue that exceeds the company's cost of goods sold (COGS), which is crucial in assessing a company's financial health.

Historical gross margin of OReilly Automotive (ORLY)

ORLY's Gross Margin has increased slightly from 0.5123 in 2022 to 0.5126 in 2023, thus adding 1 point for this criterion. This is a positive sign as an increasing Gross Margin suggests improved efficiency in managing COGS. Over the past two decades, ORLY consistently managed to outperform the industry median Gross Margin, which stood at 0.3785 in 2023. This indicates a competitive edge in operational efficiency.

Asset Turnover Ratio is growing?

Asset Turnover is a financial ratio that measures the efficiency with which a company uses its assets to generate sales.

Historical asset turnover ratio of OReilly Automotive (ORLY)

For O'Reilly Automotive (ORLY), the Asset Turnover increased slightly from 1.1837 in 2022 to 1.1933 in 2023, giving ORLY 1 point in this criterion. This upward trend suggests improved efficiency in using assets to generate revenue. Historically, the company has ranged from 1.0857 to 1.3762 over the past 20 years, with notable efficiency; thus, this slight increase continues a generally stable and efficient utilization of assets trend.


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