PKG 190.98 (+2.81%)
US6951561090Packaging & ContainersPackaging & Containers

Last update on 2024-06-06

Packaging Corp of America (PKG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Piotroski F-Score analysis of Packaging Corp of America (PKG) for 2023, with a final score of 5/9, assessing profitability, liquidity, 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: 5

We're running Packaging Corp of America (PKG) 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?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

Packaging Corp of America (PKG) has a Piotroski F-Score of 5, indicating an average financial health based on this analysis model. Key points include a strong profitability with positive net income and cash flow from operations, but declining Return on Assets (ROA). The company's financial leverage is increasing, which could be a sign of rising risk, and its current ratio has fallen, although it remains strong in comparison to the industry. The company has managed its shares well with a recent reduction. However, gross margin and asset turnover have both decreased, suggesting potential challenges in efficiency and cost management.

Insights for Value Investors Seeking Stable Income

Given the mixed signals from the Piotroski analysis, PKG presents a balanced risk-reward proposition. The positive profitability and cash flow metrics are encouraging, yet the declining ROA, rising leverage, and falling gross margin and asset turnover ratio necessitate caution. Investors should consider looking into PKG further if they are comfortable with moderate risks and see value in the company's current strategies. It could be worth keeping an eye on in case these negative trends reverse.

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

Profitability of Packaging Corp of America (PKG)

Company has a positive net income?

Net income is the total profit of a company after taxes and expenses. A positive net income indicates profitability and financial health.

Historical Net Income of Packaging Corp of America (PKG)

Packaging Corp of America (PKG) has a net income of $765,200,000 in 2023, which is positive. This puts PKG in a favorable light as a positive net income is an indicator of profitability. Examining the historical data over the last 20 years, PKG has consistently shown positive net income figures except for the year 2003. Notably, the net income has shown an uptrend with occasional fluctuations. In 2022, the net income was $1,029,800,000, slightly higher than 2023. However, the positive trend over the years, culminating in a sizable net income in 2023, accentuates the company's robust financial standing, earning it 1 point in the Piotroski Analysis under this criterion.

Company has a positive cash flow?

The criterion examines whether a company's cash flow from operations (CFO) is positive. Positive CFO indicates the firm's ability to generate cash from its regular business operations, which is crucial for financial stability.

Historical Operating Cash Flow of Packaging Corp of America (PKG)

In 2023, Packaging Corp of America's (PKG) CFO was $1,315,100,000. This is a positive figure, which means they generate substantial cash through operational activities. A positive trend in CFO is a strong indicator of the company's healthy operational performance and its ability to meet financial obligations. Analyzing the last 20 years, PKG's CFO has consistently been positive, showcasing a robust capacity to generate cash, peaking at $1,495,000,000 in 2022. This strong track record is crucial for financial health, signaling sustained profitability and efficiency in operations. Therefore, this criterion adds 1 point to PKG's overall Piotroski score.

Return on Assets (ROA) are growing?

The criterion assesses the change in ROA year-over-year. An increasing ROA indicates improving profitability.

Historical change in Return on Assets (ROA) of Packaging Corp of America (PKG)

The ROA for Packaging Corp of America (PKG) decreased from 0.13 in 2022 to 0.0917 in 2023. This decline in Return on Assets suggests a downward trend in the company's efficiency in generating profit from its assets, resulting in a score of 0 for this criterion. Historically, the industry's median ROA has shown fluctuating trends but remained generally stable. For example, the industry median ROA was 0.222 in 2023, significantly higher than PKG's. This decline should be a concern for investors.

Operating Cashflow are higher than Netincome?

Operating cash flow is the cash generated from the normal operations of a company, excluding peripheral activities. Comparing it with net income provides insight into the quality of earnings, highlighting non-cash earnings aspects.

Historical accruals of Packaging Corp of America (PKG)

In 2023, Packaging Corp of America (PKG) recorded an operating cash flow of $1,315,100,000, significantly higher than its net income of $765,200,000. Adding 1 point to its Piotroski score, this trend demonstrates superior earnings quality, as cash generation from core operations substantially exceeds accounting earnings. Throughout the last 20 years, PKG's operating cash flow has shown a positive trajectory, with marked improvements since surpassing the billion-dollar mark in 2018-2019. This highlights the company's robust cash generation capability. Additionally, operating cash flow being consistently higher than net income is indicative of lower earnings manipulation and healthier cash flows.

Liquidity of Packaging Corp of America (PKG)

Leverage is declining?

This criterion evaluates the company's debt load changes. Rising leverage indicates higher financial risk, while decreasing leverage suggests improving financial stability.

Historical leverage of Packaging Corp of America (PKG)

For Packaging Corp of America (PKG), the leverage has increased from 0.3102 in 2023 compared to 0.3397 in 2022. This increase suggests that the company's financial risk might have risen, given a higher proportion of debt relative to equity. Historically, leverage peaked in 2013 at 0.4825 and trended downwards most years from 2014 to 2020. This recent uptick might signal potential financial caution, especially when compared to the gradual reduction observed in previous years. Hence, we set the score to 0 for this criterion.

Current Ratio is growing?

Current Ratio indicates a company's ability to cover its short-term liabilities with short-term assets. It's an essential liquidity metric.

Historical Current Ratio of Packaging Corp of America (PKG)

For Packaging Corp of America (PKG), the Current Ratio decreased from 2.865 in 2022 to 2.5712 in 2023. A decrease in the Current Ratio would typically prevent the assignment of the point for this criterion, meaning PKG gets 0 on this front. Analyzing the historical data, the company's Current Ratio spiked significantly after 2010, peaking in 2019 at 3.5143, which suggests consistent strong liquidity over time. Additionally, PKG’s Current Ratio has consistently outpaced the industry median, which stood at 1.5762 in 2023 versus PKG's 2.5712, indicating a robust short-term financial position compared to its peers. Nonetheless, the recent decline highlights the importance of monitoring liquidity closely as any sustained downtrend might become a concern.

Number of shares not diluted?

Change in shares outstanding represents the issuance or buyback of shares by a company, impacting shareholder value and market perception.

Historical outstanding shares of Packaging Corp of America (PKG)

Comparing the Outstanding Shares of 92,942,238 in 2022 with 89,625,000 in 2023, we see a decrease in the Outstanding Shares. This underscores a strategic move possibly aimed at consolidating shareholder value through a share buyback program. This reduction in shares typically hints at the company's confidence in its financial health and commitment to returning value to shareholders. Consequently, this trend assigns 1 point to Piotroski's analysis for PKG. Observing the additional 20-year data, the company seems to manage its outstanding shares judiciously with slight fluctuations, aligning with market dynamics and overall strategic priorities.

Operating of Packaging Corp of America (PKG)

Cross Margin is growing?

Compare the Gross Margin of 0.2177 in 2023 with the Gross Margin of 0.2466 in 2022 and check if Gross Margin increased or decreased.

Historical gross margin of Packaging Corp of America (PKG)

In 2023, Packaging Corp of America (PKG) reported a Gross Margin of 0.2177, a decline from the 2022 Gross Margin of 0.2466. This decline signifies a reduction in cost efficiency or increased costs not passed onto customers, resulting in no points being added. Looking at data from the past 20 years, PKG's Gross Margin has fluctuated but stayed recently above the industry median until 2023. While this year's margin, at 0.2177, is still competitive given the industry median Gross Margin of 0.2220 in 2023, it represents a downward trend worth monitoring, especially in comparison to PKG's historical highs and industry performance.

Asset Turnover Ratio is growing?

Asset Turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue. It is crucial as it indicates how well the company is managing its assets to produce revenue.

Historical asset turnover ratio of Packaging Corp of America (PKG)

The Asset Turnover ratio for Packaging Corp of America (PKG) has decreased from 1.0704 in 2022 to 0.9353 in 2023. This is a negative trend since a decrease in the ratio signifies lower efficiency in asset utilization year-over-year. This decline is noteworthy considering PKG historically maintained an Asset Turnover ratio above 1 for many years. For instance, the highest Asset Turnover during the past 20 years is 1.1875 in 2008. These variations can reflect shifting operational conditions, entrance into capital-intensive phases, or less effective inventory management. Hence, no points are added based on this criterion.


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