Last update on 2024-06-07

PDF Solutions (PDFS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Analyze the financial health of PDF Solutions (PDFS) using the Piotroski F-Score model for 2023. Final Score: 8/9 - Discover profitability, leverage, and more

Short Analysis - Piotroski Score: 8

We're running PDF Solutions (PDFS) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score analysis for PDF Solutions (PDFS) focuses on profitability, liquidity, and operating efficiency. PDF Solutions achieved a strong score of 8 out of 9, indicating a solid financial position. Highlights include positive net income, an increase in operating cash flow, improved return on assets, and a higher operating cash flow than net income. The company has declining leverage, a growing current ratio, and an improved gross margin and asset turnover ratio. The only negative was an increase in the number of shares outstanding, which slightly dilutes existing shareholders.

Insights for Value Investors Seeking Stable Income

PDF Solutions (PDFS) shows a strong financial position based on the Piotroski F-Score of 8, which is a good indication for potential investment. The company's metrics generally demonstrate robust profitability, improved liquidity, and operational efficiency. However, the slight dilution of shares should be monitored. Overall, it's worth considering PDF Solutions as a promising investment opportunity.

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

Profitability of PDF Solutions (PDFS)

Company has a positive net income?

Net income is a key indicator of a company's profitability. A positive net income signals that a company is making more than it is spending, which is fundamental for continued operations and growth.

For 2023, PDF Solutions (PDFS) has reported a net income of $3,105,000. Given that this number is positive, it earns 1 point in the Piotroski score. Additionally, a look at the historical data over the last 20 years shows significant fluctuations in net income, with several years of negative figures, particularly the striking loss of $95,728,000 in 2008. Despite these variations, the positive net income in 2023 is a notable development, indicating an upswing in profitability and aligning well with the Piotroski criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the money a company generates from its ongoing, regular business activities, excluding capital expenditures and investments.

When examining PDF Solutions (PDFS) and its Cash Flow from Operations (CFO), the 2023 CFO figure of $14,600,000 is indeed positive, resulting in the allocation of 1 point in Piotroski's scoring system. If we delve into the historical data spanning the last 20 years, the CFO values exhibit a mixed trend. Notably, there were years with substantial negative cash flows—like 2003 and 2009, reporting -$6,833,000 and -$4,603,000 respectively. Such figures underscore periods of operational challenges or perhaps significant investments that initially weighed down cash flows. Conversely, years like 2012 and 2022 marked impressive CFOs of $32,298,000 and $25,363,000 respectively, highlighting phases of robust operational efficiency and profitability. The oscillations in the cash flow data emphasize the dynamic operational landscape of PDF Solutions. Thus, the trend in operating cash flows looks broadly favorable in recent years, even though it has been relatively volatile. The positive CFO in 2023 adds a commendable point to the overall financial health assessment for PDFS.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) measures how effectively a company utilizes its assets to generate earnings. An increasing ROA is a positive indicator of improving profitability.

PDF Solutions (PDFS) has seen a notable improvement in its Return on Assets (ROA) from -0.0124 in 2022 to 0.0109 in 2023. This improvement translates into a positive change and adds 1 point to its Piotroski F-Score. To put this in perspective, the company's gradual upward trend in ROA over the past year marks a positive shift in asset utilization and profitability. While comparing it to the last 20 years, the industry median ROA has consistently hovered above 0.60, highlighting that PDF Solutions still has room for improvement to reach industry standards. However, an improvement is always a good indicator of favorable change.

Operating Cashflow are higher than Netincome?

Operating cash flow being higher than net income is an important criterion because it indicates high-quality earnings. It suggests that the company's reported net income is backed by actual cash generated by its operations, reducing the risk of accruals or non-cash earnings manipulation.

With an operating cash flow of $14,600,000 as compared to a net income of $3,105,000, PDF Solutions enjoys a strong alignment in these measures. This gap highlights the concrete and liquid nature of its earnings. Historically, PDFS has shown variability in its operating cash flow versus net income alignment, particularly noticeable in years like 2008, with a stark discrepancy (-$9,572,800,0 net income vs. $7,564,000 cash flow from operations). However, for 2023, the higher operating cash flow compared to net income is indicative of robust earnings quality and healthier cash-based profitability. The trend appears positive based on current data, and adds 1 point in the Piotroski analysis for PDF Solutions.

Liquidity of PDF Solutions (PDFS)

Leverage is declining?

Comparing the leverage typically involves assessing the firm's debt-to-equity ratio over a period. It indicates financial stability and is crucial for risk assessment.

For PDF Solutions (PDFS), leverage shifted from 0.0213 in 2022 to 0.0161 in 2023. This downward trend reflects a decrease in leverage, meaning the company has improved its financial stability by reducing its debt burden. Given the reliance on debt as a measure, a lower leverage ratio is often favorable, earning PDF Solutions a 1-point increment under the Piotroski scoring system. Historically, leverage peaked at 0.032 in 2019 and has shown significant decline over recent years, indicating prudent debt management. The latest data suggests a more conservative and stable financial strategy.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term obligations with its short-term assets. A higher ratio indicates a stronger liquidity position and greater financial health.

The Current Ratio for PDF Solutions (PDFS) increased from 3.3232 in 2022 to 3.8914 in 2023, signifying an improvement in liquidity. Compared to the last 20 years, this is a positive trend, though it's worth noting that past ratios have been even higher, such as 5.0423 in 2005 and 10.3966 in 2013. Additionally, PDFS has consistently outperformed the industry median, which stood at 1.7519 in 2023 and has historically been much lower than PDFS’s current ratios. Therefore, the increase in 2023 is a favorable trend, adding 1 point to the Piotroski Score. PDFS's robust current ratio ensures it is well-positioned to meet short-term financial obligations, providing a safety cushion against market volatilities.

Number of shares not diluted?

Change in shares outstanding refers to the difference in the number of shares that are currently in circulation among investors. It is crucial in evaluating a company's equity structure.

The Outstanding Shares for PDF Solutions (PDFS) increased from 37,309,000 in 2022 to 38,015,000 in 2023. This shows an uptick in the number of shares by 706,000. According to Piotroski's scoring model, this would result in a score of 0 for this criterion, as the share count has increased rather than decreased. Looking at the last 20 years, we can observe a fairly consistent growth trend in the number of outstanding shares. For example, shares grew from 23,278,000 in 2003 to 38,015,000 in 2023, reflecting a nearly 64% increase over two decades. This could indicate company expansion but may also hint at potential shareholder dilution. While issuing more shares can be a strategy for raising capital, it's crucial for investors as it dilutes their existing ownership.

Operating of PDF Solutions (PDFS)

Cross Margin is growing?

Change in Gross Margin is the comparison of a company's gross margin over two periods. It is crucial because an increasing gross margin over time may indicate improved efficiency and cost management, leading to better profitability.

For PDF Solutions (PDFS), the gross margin increased to 0.6879 in 2023 from 0.6775 in 2022, which signifies an improvement in efficiency and cost structure. Over the past 20 years, the gross margin has generally trended upwards, with notable fluctuations. The gross margin of 0.6879 in 2023 not only denotes an increase from the previous year but stands significantly above the long-term industry median of 0.6741 for 2023. This positive trend earns PDFS 1 point in the Piotroski analysis for this criteria.

Asset Turnover Ratio is growing?

Asset Turnover measures a firm's efficiency at using its assets to generate revenue. It is a crucial metric for assessing operational effectiveness.

For PDF Solutions (PDFS), the Asset Turnover ratio increased from 0.5378 in 2022 to 0.5831 in 2023. This upward trend signifies a positive development, highlighting improved efficiency in using its assets to generate sales. Given the increase, 1 point is added. Analyzing the historical data, PDFS's Asset Turnover peaked between 2007 and 2011, suggesting enhanced operational activities during those years. This positions the 2023 ratio improvement as a positive movement towards regaining past operational efficiencies.