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Last update on 2024-06-05

Pernod Ricard (PER.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Pernod Ricard (PER.DE) Piotroski F-Score analysis for 2023. Final score is 6/9, indicating stable profitability, liquidity, and leverage metrics.

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: 6

We're running Pernod Ricard (PER.DE) 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?
0
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score of Pernod Ricard (ticker: PER.DE) is 6 out of 9, signifying a moderately strong financial position. Key profitability metrics such as net income (€2,262M) and cash flow from operations (€2,033M) are positive. The Return on Assets (ROA) has grown slightly. However, the operating cash flow is lower than net income, reducing earnings quality. Liquidity shows a mixed scenario: leverage increased slightly, the current ratio declined, and the number of outstanding shares decreased. While the asset turnover ratio rose, the gross margin fell slightly.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 6, Pernod Ricard shows good profitability and improving asset efficiency. However, weaknesses in liquidity (declining current ratio) and a decrease in gross margin hint at underlying caution. Given these factors, the stock may be worth considering, especially if there are no better alternatives. Nonetheless, it might require more scrutiny before making a final investment decision due to some fluctuating metrics.

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

Profitability of Pernod Ricard (PER.DE)

Company has a positive net income?

Examining net income is crucial for evaluating a company's profitability. A positive net income reflects a company's ability to generate more revenue than expenses, contributing to shareholder value.

Historical Net Income of Pernod Ricard (PER.DE)

The net income for Pernod Ricard in 2023 stands at €2,262,000,000, which is positive. Over the past two decades, Pernod Ricard has shown a general upward trend in net income, with some fluctuations. For instance, in years like 2020, net income dropped to €329 million—lining up with the pandemic's impact. However, the rebound to €2,262 million is a robust indicator of recovery and growth, thus yielding 1 point in this Piotroski criterion and signifying good financial health.

Company has a positive cash flow?

The cash flow from operations (CFO) measures the amount of cash a company generates from its regular business operations.

Historical Operating Cash Flow of Pernod Ricard (PER.DE)

For 2023, Pernod Ricard (PER.DE) reported a CFO of €2,033,000,000. Positively, this indicates the company's ability to generate substantial cash from its core activities. The CFO has shown a consistent upward trend over the past two decades, denoted by figures like €480,200,000 in 2003 and €2,294,000,000 in 2022. This positive trajectory suggests a strong operational performance, granting Pernod Ricard an additional point in the Piotroski Analysis. The consistent growth reaffirms confidence in the company's operational efficiency and sustainability.

Return on Assets (ROA) are growing?

Return on Assets (ROA) compares a company's net income to its total assets, providing insight into how efficiently the company is utilizing its assets to generate profit. It assesses operational performance and profitability.

Historical change in Return on Assets (ROA) of Pernod Ricard (PER.DE)

Pernod Ricard's ROA has increased from 0.0586 in 2022 to 0.0614 in 2023, indicating a positive trend in its asset utilization efficiency. Despite this improvement, when compared to the industry median ROA of 0.5508 in 2023, it is evident that Pernod Ricard's ROA is substantially lower. This suggests that while the company is improving, it still lags behind the broader industry in terms of asset efficiency. Such an increase, albeit modest, warrants a point under Piotroski analysis since it reflects better operational efficiency year over year. The additional data showing fluctuations in ROA over the past two decades underscores the ongoing volatility the company has experienced in asset efficiency. The increase, becoming part of a long-term trend, is promising but should be critically observed in comparison to industry benchmarks.

Operating Cashflow are higher than Netincome?

This criterion compares the operating cash flow to net income to determine the quality of earnings and the company's ability to generate cash. A higher operating cash flow than net income signifies better earnings quality and robust cash generation.

Historical accruals of Pernod Ricard (PER.DE)

In 2023, Pernod Ricard's operating cash flow stands at €2,033 million, while its net income is higher at €2,262 million. This results in accruals slightly higher than the EPS, which can be seen as unfavorable. Over the past two decades, the operating cash flow has surpassed net income multiple times, indicating a general consistency in cash generation capability. However, for 2023, it falls short, resulting in a score of 0 for this criterion. The trend shows fluctuations but has generally grown positively, yet in the latest fiscal year, did not meet the beneficial threshold.

Liquidity of Pernod Ricard (PER.DE)

Leverage is declining?

Explain the criterion for Pernod Ricard (PER.DE) and why it is important to consider

Historical leverage of Pernod Ricard (PER.DE)

Leverage, or the amount of debt used to finance a company's assets, is an important indicator of financial health. A decrease in leverage suggests that the company is less reliant on borrowing, which could be positive for financial stability. For Pernod Ricard, the leverage increased from 0.2726 in 2022 to 0.2717 in 2023, which implies a marginal increase in leverage. Based on this, no additional points will be added.

Current Ratio is growing?

A current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. It is calculated by dividing current assets by current liabilities.

Historical Current Ratio of Pernod Ricard (PER.DE)

In 2023, the current ratio for Pernod Ricard (PER.DE) decreased to 1.7317 from 1.9502 in 2022. This is below the last 20 years’ median industry current ratio of 2.048 for 2023. To put this into context, the company's current ratio in 2020 was at its highest for the last two decades at around 2.4501, while the lowest was 1.4441 in 2015. Looking back over the last 20 years, the current ratio has fluctuated and rarely aligned with the industry median, showing both peaks and valleys. The downward trend from 1.9502 in 2022 to 1.7317 in 2023 implies a reduction in liquidity, which is considered unfavorable for Piotroski F-Score criteria and thus scores 0 points.

Number of shares not diluted?

Change in Shares Outstanding is one of the key criteria for the Piotroski F-Score. It indicates whether a company is issuing more shares, which can be a sign of dilution. This is important as existing shareholders prefer a decrease in outstanding shares, which can lead to an increase in the value of their shares.

Historical outstanding shares of Pernod Ricard (PER.DE)

In 2022, the Outstanding Shares were 259,031,734, and in 2023, they had decreased to 256,048,280. The reduction in outstanding shares points to the fact that the company has likely executed a buyback program or other measures to reduce the number of shares in the market. This is generally a positive signal as it shows the company's management is focused on increasing shareholder value. Over the last 20 years, periods of significant increases were observed multiple times such as in 2006-2007 where shares went from 185,882,194 to 227,937,631. A steady decline or stabilization since 2019 has been beneficial in fostering investor confidence. Thus, for 2023, we add 1 point to the Piotroski F-Score.

Operating of Pernod Ricard (PER.DE)

Cross Margin is growing?

The criterion is to compare the Gross Margin of Pernod Ricard for the year 2023 with that of the year 2022. If the Gross Margin has increased in 2023, it shows improved profitability and efficiency.

Historical gross margin of Pernod Ricard (PER.DE)

The Gross Margin for Pernod Ricard in 2023 is 0.597, down from 0.6049 in 2022, indicating a decline. This decline signifies a decrease in profitability and operational efficiency compared to the previous year. Furthermore, when compared to the industry median Gross Margin of 0.5508 in 2023, Pernod Ricard is still performing above the industry norm. However, the downward trend remains a concern. Therefore, for the Piotroski Analysis, we cannot add a point for this criterion as the Gross Margin has decreased in 2023, making this a negative trend for Pernod Ricard.

Asset Turnover Ratio is growing?

Asset Turnover compares revenue to total assets, indicating how efficiently a company uses its assets to generate sales. Higher turnover indicates better performance.

Historical asset turnover ratio of Pernod Ricard (PER.DE)

For Pernod Ricard (PER.DE), the Asset Turnover has increased from 0.314 in 2022 to 0.3294 in 2023, indicating an improvement in the company's efficiency in generating sales from its assets. This upward trend is positive, reflecting effective asset utilization leading to higher revenue generation. Over the past 20 years, the ratio has seen fluctuations, with the 2023 value being higher than several past years, demonstrating a promising consumption strategy.


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