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Last update on 2024-06-14

PepsiCo (PEP) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Comprehensive Piotroski F-Score analysis for PepsiCo (PEP) in 2023. Final Score: 8/9, indicating strong financial health and investment potential.

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 PepsiCo (PEP) 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?
1
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 assesses a company's financial strength on a scale from 0 to 9 based on 9 criteria tied to profitability, liquidity, and operating efficiency. PepsiCo (PEP) scored 8 out of 9, highlighting a solid financial position. The key findings include: the company has a positive net income of $9.07 billion; it shows strong liquidity with a positive cash flow from operations of $13.442 billion and improved current ratio; leverage has decreased suggesting better financial structure. However, Return on Assets (ROA) showed a slight decline. Overall, PepsiCo demonstrates good financial health and operational efficiency.

Insights for Value Investors Seeking Stable Income

Given PepsiCo's high Piotroski F-Score of 8, indicating financial strength and operational efficiency, it appears to be a solid investment prospect. The positive profitability metrics, declining leverage, and improved liquidity position suggest strong fundamentals. Even though ROA has slightly declined, the overall financial health and positive cash flows make PepsiCo a valuable company to consider. It's worth looking into this stock if you're seeking a relatively stable investment.

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

Profitability of PepsiCo (PEP)

Company has a positive net income?

Net income represents the company's total earnings and is an important indicator of profitability.

Historical Net Income of PepsiCo (PEP)

PepsiCo's net income for 2023 is $9.07 billion, which is positive and thus scores a 1 point in the Piotroski analysis. Over the past 20 years, PepsiCo has consistently posted positive net income, with a notable peak in 2018 at $12.52 billion. The upward trend in recent years, especially from $8.91 billion in 2022 to $9.07 billion in 2023, indicates strong and steady profitability, which is favorable for investors.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the amount of cash a company generates from its regular operating activities. Positive CFO indicates healthy cash flow and operational efficiency.

Historical Operating Cash Flow of PepsiCo (PEP)

PepsiCo (PEP) has a CFO of $13,442,000,000 in 2023, which is positive. This is a favorable trend and suggests the company's operations are generating substantial cash. Comparing this to the previous years, it’s clear that PepsiCo's CFO has seen a consistent upward trajectory, particularly since 2003, showcasing resilience and growth. This positive trend grants PepsiCo 1 point in the Piotroski analysis.

Return on Assets (ROA) are growing?

The Change in ROA criterion measures a company's improvements in profitability. It compares the Return on Assets (ROA) from the current year to the previous year.

Historical change in Return on Assets (ROA) of PepsiCo (PEP)

PepsiCo's ROA declined from 0.0966 in 2022 to 0.0942 in 2023. This decrease in ROA suggests that the company generated less profit from its assets in 2023 compared to 2022. This trend is not favorable, leading to a Piotroski score of 0 for this criterion. It's essential to note that while PepsiCo's ROA is considerably lower than the industry's median ROA of 0.4804 in 2023, its steady operating cash flow over the past 20 years indicates its resilience and operational efficiency in generating cash.

Operating Cashflow are higher than Netincome?

Operating cash flow should be higher than net income because it reflects the company's ability to generate sufficient cash to sustain and grow its operations, irrespective of non-cash accounting items.

Historical accruals of PepsiCo (PEP)

For the fiscal year 2023, PepsiCo posted an operating cash flow of $13.442 billion compared to a net income of $9.074 billion. This results in a positive scenario where operating cash flow indeed surpasses net income by a significant margin ($4.368 billion to be exact). This trend is favorable and indicates strong cash flow generation capability. Over the past 20 years, PepsiCo's operating cash flow has generally shown an upward trajectory, rising from $4.328 billion in 2003 to a notable peak of $13.442 billion in 2023. Concurrently, net income figures have also witnessed positive growth, albeit with occasional fluctuations, increasing from $3.568 billion in 2003 to $9.074 billion in 2023. Linking to Piotroski's F-score, this criterion scores a full point, reflecting robust cash-flow health in relation to net income. This positive trend suggests efficient management and sustainability of operations without relying excessively on accounting accruals, which are notably stable and consistent over the period.

Liquidity of PepsiCo (PEP)

Leverage is declining?

Change in Leverage refers to the ratio of a company's total liabilities to its total equity. Lower leverage suggests better financial health.

Historical leverage of PepsiCo (PEP)

The leverage for PepsiCo in 2022 was 0.3868 and it decreased slightly to 0.3741 in 2023. This trend indicates an improvement in the company's financial structure. In 2023, PepsiCo managed to bring down its leverage, suggesting a better balance between its liabilities and equity. Over the past 20 years, leverage has shown some fluctuations. Notably, after peaking at 0.4345 in 2020, PepsiCo has demonstrated a consistent effort to reduce this ratio. The decrease in leverage for 2023 adds a point to the Piotroski score, reflecting this positive financial development.

Current Ratio is growing?

The current ratio measures a company's ability to cover its short-term liabilities with its short-term assets.

Historical Current Ratio of PepsiCo (PEP)

For PepsiCo (PEP), the current ratio increased slightly from 0.8041 in 2022 to 0.8516 in 2023. Although the company has seen an improvement in its current ratio year-over-year, it remains below both historical levels and the industry median. Historically, PepsiCo's current ratio has tended to fluctuate, ranging from a high of 1.5134 in 2017 to a low of 0.8041 in 2022. The industry median has generally remained higher than that of PepsiCo, as seen in 2023 where the industry median is 1.417 compared to PepsiCo’s 0.8516. Overall, the improvement in 2023 is positive, reflecting better liquidity, but the company's short-term financial health still lags behind its peers.

Number of shares not diluted?

Change in shares outstanding tracks the number of shares issued by a company, reflecting any buy-backs or additional issuance. It's essential as it impacts EPS and investor dilution.

Historical outstanding shares of PepsiCo (PEP)

The number of shares outstanding for PepsiCo slightly decreased from 1,380,000,000 in 2022 to 1,374,000,000 in 2023. This decrease generally suggests a positive action as it indicates share buybacks, which could be a strategy to enhance shareholder value by decreasing the supply of shares, potentially boosting the EPS. Over the last 20 years, PepsiCo has shown a consistent decrease in its number of shares, apart from minor fluctuations, indicating a sustained commitment to share buybacks. Hence, for the Piotroski criterion, PepsiCo earns 1 point for reducing its outstanding shares in 2023.

Operating of PepsiCo (PEP)

Cross Margin is growing?

Gross Margin assesses a company's financial health by revealing the portion of revenue that exceeds the cost of goods sold. It's a key indicator of profitability and operational efficiency.

Historical gross margin of PepsiCo (PEP)

For PepsiCo, the Gross Margin increased from 0.5303 in 2022 to 0.5421 in 2023. This positive change in gross margin by 118 basis points reflects improved efficiency and perhaps effective cost management or pricing strategies. Considering the historical data, PepsiCo has consistently outperformed the industry median gross margin over the past 20 years, further indicating superior managerial practices and market positioning. For example, in 2023, PepsiCo's gross margin of 0.5421 stands well above the industry median of 0.4804. Given this upward trend, PepsiCo earns a full point for this criterion.

Asset Turnover Ratio is growing?

Change in Asset Turnover is assessed to determine the efficiency with which a company is utilizing its assets to generate sales. An increase in Asset Turnover indicates better performance and implies that the company is generating more revenue per dollar of assets. This metric is crucial for investors as it offers insight into operational efficiency and management effectiveness.

Historical asset turnover ratio of PepsiCo (PEP)

With an Asset Turnover of 0.9495 in 2023 compared to 0.9362 in 2022, PepsiCo's asset turnover ratio has increased, adding 1 point under the Piotroski score. This positive trend demonstrates that the company has managed to improve its efficiency slightly in utilizing its assets to generate sales. Over the last 20 years, the company's Asset Turnover ratio has seen a general decline from 1.1053 in 2003 to its current value, suggesting fluctuating operational efficiency. However, the recent increase is a favorable indication, especially in the context of ongoing operational adjustments and market conditions.


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