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Last update on 2024-06-06

Philip Morris (PM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Explore the Piotroski F-Score Analysis of Philip Morris (PM) for 2023. Understand its financial strength with key insights into 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: 4

We're running Philip Morris (PM) 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?
0
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

Philip Morris (PM) was evaluated using the Piotroski F-Score, a 9-criteria system to gauge a company's financial strength. The criteria are based on aspects like profitability, liquidity, and operating efficiency. PM scored a 4 out of 9. The detailed analysis found that PM had positive net income and operating cash flow, a growing current ratio, and that its operating cash flow was higher than its net income. However, it had declining return on assets, an increasing financial leverage, a slight dilution of shares, a declining gross margin, and a dropping asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Philip Morris (PM) shows some strengths in its financial management, such as steady profitability and solid cash flows. However, the increase in financial leverage and decline in efficiency ratios (ROA and asset turnover) are concerning. Given the mixed results, further in-depth analysis and consideration of other qualitative factors are advisable before making an investment decision. If you prioritize long-term stable cash flows, PM could be worth looking into, but be cautious about the increasing debt and potential efficiency issues.

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

Profitability of Philip Morris (PM)

Company has a positive net income?

The Net Income criterion evaluates if a company has achieved a positive net income within a year and it is crucial for ascertaining profitability.

Historical Net Income of Philip Morris (PM)

Based on the data provided, Philip Morris (PM) has reported a net income of $7.81 billion in 2023. This is a positive figure, which results in adding 1 point according to the Piotroski analysis. Looking at the trend over the last 20 years, the company has maintained a strong profitability track record, with the lowest net income of $3.98 billion in 2003 and peaking at $9.10 billion in 2021. This consistent performance indicates stable profitability, making this a positive trend.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) criterion evaluates the net amount of cash generated from a company's core business operations. It is crucial as it indicates the liquidity and overall financial health of the company.

Historical Operating Cash Flow of Philip Morris (PM)

In 2023, the CFO for Philip Morris (PM) stood at 9,204,000,000 USD. This is a positive figure, suggesting that the company has successfully generated substantial cash from its daily business activities. Over the last 20 years, PM has consistently shown positive CFO values, reinforcing the robustness of its core operations. Notably, CFO figures ranged from 4.63 billion USD in 2003 to a high of 11.967 billion USD in 2021. Such consistent performance is beneficial as it underscores the company's ability to maintain healthy liquidity and operational efficiency over an extended period. Therefore, PM earns 1 point for this criterion.

Return on Assets (ROA) are growing?

The first criterion examines the change in Return on Assets (ROA) from one year to the next. ROA measures how efficiently a company uses its assets to generate earnings. Hence, a rising ROA typically indicates improving asset efficiency.

Historical change in Return on Assets (ROA) of Philip Morris (PM)

The ROA for Philip Morris (PM) in 2023 is 0.1231, which is a decrease from the ROA of 0.1757 reported in 2022. This results in a point of 0 for this criterion, as the ROA has not increased. Such a decline can be concerning as it may suggest a reduction in the company's efficiency in generating earnings from its assets. Specifically, the decrease from 0.1757 to 0.1231 marks a significant drop, indicating that the company was less effective in asset utilization. Looking at long-term data, while there have been fluctuations, the recent downward trend in ROA could signify potential challenges in maintaining operational efficiency. Moreover, comparing this with industry median ROA for the same years, PM's figures are notably lower than the industry median (0.307 in 2022 and 0.4018 in 2023), underscoring competitive inefficiencies. However, it is essential to consider other financial metrics and broader economic factors before concluding.

Operating Cashflow are higher than Netincome?

Explain the criterion for Philip Morris (PM) and why it is important to consider

Historical accruals of Philip Morris (PM)

The criterion of Operating Cash Flow (OCF) being higher than Net Income (NI) is crucial for assessing a company's earnings quality. It indicates that the company is generating sufficient cash to cover its net profits, which is a positive signal for financial health. For Philip Morris (PM), comparing the OCF of $9,204 million with the NI of $7,813 million in 2023, the OCF is indeed higher. This results in a score of 1 according to the Piotroski F-Score criteria. Historically, the company's OCF has shown strength, particularly from 2008 onwards, often surpassing NI. This consistency reinforces PM’s robust cash-generating capabilities, making it a favorable stock from a fundamental analysis perspective.

Liquidity of Philip Morris (PM)

Leverage is declining?

This criterion evaluates the change in financial leverage, which is the company's use of debt to finance its operations. A decrease in leverage is typically seen favorably as it indicates reduced financial risk.

Historical leverage of Philip Morris (PM)

Comparing the leverage ratio of Philip Morris (PM) in 2022, which stood at 0.5654, and in 2023, at 0.6316, there is a clear increase in leverage. This rise implies that the company has taken on more debt relative to its equity, elevating its financial risk. Charting the last 20 years, Philip Morris had significant leverage peaks, such as in 2014 with a leverage ratio of 0.7653. The upward trend in 2023 reverts the decline seen in preceding years, reversing a decrease last noted in 2018. While the company's leverage remains below the historical peak levels, the increase in 2023 is a negative signal within the Piotroski framework, scoring 0 for this criterion.

Current Ratio is growing?

Change in current ratio evaluates the company's ability to pay off short-term liabilities with short-term assets. An increasing current ratio suggests improving liquidity.

Historical Current Ratio of Philip Morris (PM)

The current ratio for Philip Morris (PM) increased from 0.7177 in 2022 to 0.7488 in 2023. While this is still below the industry median of 2.1871 in 2023, the upward trend is a positive indicator for Philip Morris's liquidity. However, it is important to note that a current ratio below 1 still indicates potential liquidity risks, as the company might not have sufficient current assets to cover its current liabilities. Therefore, while the increase earns a point in the Piotroski analysis, Philip Morris should aim to further improve its current ratio to meet or exceed industry standards.

Number of shares not diluted?

Change in shares outstanding considers whether a company is issuing more shares or buying them back, thus influencing shareholder value.

Historical outstanding shares of Philip Morris (PM)

Examining the outstanding shares of Philip Morris (PM), the number increased from 1,550,000,000 in 2022 to 1,552,000,000 in 2023. This increment can be a concern for shareholders since it can dilute the value of existing shares. Furthermore, analyzing the 20-year trend, we observe a notable decrease from 2,038,000,000 in 2003 to 1,552,000,000 in 2023, indicating a long-term trend towards buybacks, which is generally positive. However, the year-over-year increase this recent year implies a potential shift. For the Piotroski score, this criterion results in 0 points as shares outstanding increased.

Operating of Philip Morris (PM)

Cross Margin is growing?

This criterion examines whether the company's gross margin – the difference between revenue and the cost of goods sold divided by revenue – has improved over the past year. A higher gross margin indicates that the company is making more money on each dollar of sales, suggesting better efficiency and profitability.

Historical gross margin of Philip Morris (PM)

The Gross Margin for Philip Morris (PM) in 2023 was 0.6335, compared to 0.641 in 2022. This indicates that the Gross Margin has slightly decreased from the previous year. Therefore, in the Piotroski Analysis for this criterion, we do not add a point, setting it to 0. Examining the historical data, the Gross Margin has generally been high for Philip Morris over the past 20 years, with small fluctuations. The Gross Margin peaked in 2020 at 0.6806, followed by a decline in the subsequent years. Similarly, the fluctuations within the Industry Median Gross Margin indicate a volatile environment in the industry. However, Philip Morris consistently outperformed the industry median over these 20 years, illustrating their market leadership and pricing power despite the recent downturn.

Asset Turnover Ratio is growing?

Compare Asset Turnover values from 2022 to 2023 and measure the difference. Asset Turnover evaluates the efficiency of a company's use of its assets to generate sales.

Historical asset turnover ratio of Philip Morris (PM)

Comparing the Asset Turnover for Philip Morris (PM), it declined from 0.6169 in 2022 to 0.554 in 2023. This negative trend suggests a decreased efficiency in utilizing assets to generate revenue, possibly due to changes in sales volume, asset base, or operational challenges. An analysis of the last 20 years of data reveals volatility and recent years' ratios dropping compared to the early 2000s. Therefore, the score is 0 for this criterion.


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