OTIS 100.21 (+0.98%)
US68902V1070Industrial ProductsSpecialty Industrial Machinery

Last update on 2024-06-07

Otis Worldwide (OTIS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

In-depth Piotroski F-Score analysis for Otis Worldwide (OTIS) - 2023 reveals a strong financial position with a final score of 8/9. Key insights on profitability 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: 8

We're running Otis Worldwide (OTIS) 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?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

Otis Worldwide (OTIS) has a Piotroski F-Score of 8 out of 9, indicating a strong financial position. The score is derived from various factors that reflect profitability, liquidity, and operating efficiency. Specifically, OTIS shows strong profitability with positive net income and cash flow, and a growing Return on Assets (ROA). The company's operating efficiency is highlighted by its higher operating cash flow compared to net income and an increasing asset turnover ratio. However, OTIS's leverage has risen, indicating higher debt levels, and its current ratio, though improving, is still below the industry median. The company has also been successfully reducing its outstanding shares and has seen a slight improvement in its gross margin.

Insights for Value Investors Seeking Stable Income

Given its high Piotroski F-Score and strong financial health indicators, Otis Worldwide (OTIS) appears to be a promising investment. The company's consistent profitability, efficient cash flow management, and strategic reduction of outstanding shares strengthen its investment profile. However, potential investors should also consider the rising leverage and relatively low current ratio compared to industry standards. Overall, OTIS seems worth looking into, especially for those seeking a financially robust and efficient company.

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

Profitability of Otis Worldwide (OTIS)

Company has a positive net income?

The Piotroski analysis considers positive net income as a sign of fundamental financial health and profitability, adding 1 point if it's positive.

Historical Net Income of Otis Worldwide (OTIS)

Otis Worldwide (OTIS) reported a net income of $1.406 billion in 2023. This indicates a significant profit, reflecting positively on the company's profitability. Reviewing the last seven years: 2017 recorded $636 million, 2018 saw $1.049 billion, 2019 had $1.116 billion, 2020 logged $906 million, 2021 featured $1.246 billion, and 2022 $1.253 billion. The upward trend in net income, culminating in $1.406 billion in 2023, underscores Otis Worldwide's solid and improving financial performance. Indeed, it merits the full 1 point for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates how well a company can generate cash from its core operations.

Historical Operating Cash Flow of Otis Worldwide (OTIS)

The Cash Flow from Operations (CFO) for Otis Worldwide (OTIS) in 2023 stands at $1.63 billion, which is positive. In the Piotroski Analysis, this criterion would yield 1 point. This is crucial as a positive CFO suggests the company's ability to generate sufficient cash to sustain and grow its operations. Looking at historical data, OTIS has reported consistently positive CFOs over the last seven years, further underscoring its robust operational efficiency. For context, here are the CFO figures from previous years: $1.45 billion in 2017, $1.55 billion in 2018, $1.47 billion in 2019, $1.48 billion in 2020, $1.75 billion in 2021, $1.56 billion in 2022, and $1.63 billion in 2023. The trend of consistently positive operating cash flow confirms OTIS’s operational health and strengthens its profile from a financial prudence perspective.

Return on Assets (ROA) are growing?

The criterion for assessing the change in Return on Assets (ROA) of Otis Worldwide (OTIS) involves comparing its ROA values year over year. ROA is a critical metric that indicates how efficiently a company can convert the money it invests in assets into net income.

Historical change in Return on Assets (ROA) of Otis Worldwide (OTIS)

The ROA for Otis Worldwide increased from 0.1134 in 2022 to 0.1411 in 2023, resulting in an improvement. Therefore, Otis Worldwide earns 1 point for this criterion. Despite this positive trend for OTIS, we should also consider the broader industry context where the company's ROA is sizable lower than the industry median, which stood at 0.3383 in 2022 and slightly improved to 0.3492 in 2023. This divergence suggests that although Otis World's internal efficiency in generating income from assets has improved, it still has significant ground to cover to align with the performance norms in its industry. Additionally, looking at Operating Cash Flow, OTIS witnessed an increase from $1.4 billion in 2017 to around $1.6 billion in 2023, indicating a decent but not exceptional conversion of earnings into cash. Overall, while the year-over-year growth in ROA is a recession-proof sign, the relatively low absolute numbers in both ROA and cash flow call for strategic measures to match industry performance.

Operating Cashflow are higher than Netincome?

An evaluation criterion that compares Operating Cash Flow to Net Income, indicating profit quality.

Historical accruals of Otis Worldwide (OTIS)

In 2023, Otis Worldwide's Operating Cash Flow is $1.627 billion while its Net Income is $1.406 billion. This indicates that OTIS generates more cash from its operations than it reports in net income, adding a point to the Piotroski score. This trend, with continuous improvement over the years, signifies solid earnings quality. Therefore, the 2023 characteristic of having a higher Operating Cash Flow compared to Net Income strongly suggests that OTIS's profits are backed by actual cash flows, which is a positive sign for investors.

Liquidity of Otis Worldwide (OTIS)

Leverage is declining?

Compare the Leverage of Otis Worldwide (OTIS) from 2022 to 2023 and check if it increased or decreased. If the Leverage decreased, assign 1 point, otherwise assign 0 points.

Historical leverage of Otis Worldwide (OTIS)

Analyzing the leverage ratio, Otis Worldwide's leverage increased from 0.6531 in 2022 to 0.7075 in 2023. This rise indicates a higher reliance on debt financing over the period, which raises the company's financial risk. Comparing data from the last seven years, we observe a gradual increase in leverage from 0 in 2017 to 0.7075 in 2023, except for a minor leverage presence in 2019 (0.0398). This consistent upward trend suggests a strategic move towards leveraging debt for growth or operational purposes. Given the negative implication of higher leverage, for the Piotroski score, this trend receives 0 points.

Current Ratio is growing?

Change in the Current Ratio for Otis Worldwide (OTIS) compares the company's ability to cover short-term liabilities with its short-term assets in 2022 and 2023.

Historical Current Ratio of Otis Worldwide (OTIS)

The Current Ratio for Otis Worldwide (OTIS) in 2023 stood at 0.9878, an increase from 0.8977 in 2022. This upward trend is a positive sign as it indicates an improvement in the company's liquidity position and its ability to meet short-term obligations. However, it is worth noting that despite the increase, the Current Ratio remains below 1, suggesting that liabilities still marginally exceed assets. Compared to the industry median, which lies at a robust 1.7757 for 2023, Otis Worldwide's Current Ratio is considerably lower. Historically, its Current Ratio has fluctuated, achieving a peak of 1.3224 in 2021. Although the recent increase is positive, there remains room for improvement when benchmarked against industry standards. In summation, Otis Worldwide's score for this criterion is 1 point due to the increase in Current Ratio.

Number of shares not diluted?

Change in shares outstanding reflects a company's capital structure stability, impacting stock prices and investor perception.

Historical outstanding shares of Otis Worldwide (OTIS)

Otis Worldwide's outstanding shares decreased from 420,000,000 in 2022 to 411,400,000 in 2023, representing a reduction of approximately 2%. This trend positively reflects shareholder value management since reducing share count generally improves per-share financial ratios. Looking at the longer history, Otis has progressively reduced its shares from 436,400,000 in 2017 to the current 411,400,000. This is a good trend suggesting the company is possibly engaging in share buybacks to return value to shareholders.

Operating of Otis Worldwide (OTIS)

Cross Margin is growing?

Gross Margin is a company's revenue after subtracting the costs of goods sold, indicating its financial health and pricing strategy.

Historical gross margin of Otis Worldwide (OTIS)

The Gross Margin for Otis Worldwide (OTIS) has improved from 0.2864 in 2022 to 0.2951 in 2023, marking an increase of 0.0087. This slight improvement indicates better control over production costs and efficiency. Despite this, OTIS's Gross Margin still lags behind the industry median of 0.3492 in 2023. Historically, OTIS's Gross Margin has seen fluctuations, peaking at 0.3004 in 2017 and dipping to its lowest in 2022. While the recent uptick earns 1 point in Piotroski analysis, there's room for further improvement to catch up with industry standards.

Asset Turnover Ratio is growing?

Asset Turnover Ratio measures a company's efficiency in using its assets to generate revenue. It is calculated by dividing net sales by total average assets.

Historical asset turnover ratio of Otis Worldwide (OTIS)

The Asset Turnover Ratio for Otis Worldwide (OTIS) has increased from 1.2386 in 2022 to 1.4255 in 2023, indicating a marked improvement in asset utilization. This rise translates to a Piotroski score increase of 1 point for this criterion. Historically, OTIS shows fluctuation, with asset turnover ratios generally sitting just above 1 in recent years. The recent uptick suggests a positive trend in operational efficiency, enhancing investor confidence.


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