PNR 83.28 (+4.03%)
IE00BLS09M33Industrial ProductsSpecialty Industrial Machinery

Last update on 2024-06-06

Pentair (PNR) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Discover Pentair's (PNR) 2023 Piotroski F-Score of 6/9, evaluating financial health with insights into profitability, liquidity, and efficiency indicators.

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 Pentair (PNR) 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?
1
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

The Piotroski F-Score is a measure between 0 and 9 that shows the financial health of a company by looking at its profitability, liquidity, and operating efficiency. For Pentair (PNR), the score is 6 out of 9, indicating a generally positive financial standing. Over recent years, Pentair has shown strong net income and cash flow from operations, which are good signs of profitability and operational efficiency. However, there are concerns with the operating cash flow being slightly less than the net income, an increase in leverage, and a decrease in Asset Turnover Ratio, which show some weaknesses that need to be addressed. On the positive side, the company's return on assets, current ratio, and gross margin have been improving.

Insights for Value Investors Seeking Stable Income

Given Pentair's Piotroski score of 6, it is in reasonably good financial health, but it's not without its flaws. For investors, it's a generally promising stock but comes with some risks that should not be ignored. If you are a cautious investor, you may want to conduct further analysis on the company’s debt levels and asset efficiency. For those more willing to accommodate some risk for potential growth, it could be a suitable investment to consider for your portfolio.

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

Profitability of Pentair (PNR)

Company has a positive net income?

Net income indicates a company's profitability and is critical in assessing financial health in the Piotroski Score model.

Historical Net Income of Pentair (PNR)

For Pentair (PNR), the net income in 2023 stands at $622.7 million, which is positive. Over the last 20 years, the company's net income has shown fluctuations, with notable lows, such as in 2012 with a net loss of $107.19 million, and impressive highs, like in 2017 with a net income of $666.5 million. The consistent positive net income over recent years, especially the increase from $480.9 million in 2022 to $622.7 million in 2023, marks a favorable trend. Therefore, according to the Piotroski criteria, Pentair earns 1 point for having a positive net income, which aligns well with positive financial health indicators.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's regular business operations, indicating financial health and operational efficiency.

Historical Operating Cash Flow of Pentair (PNR)

Cash Flow from Operations (CFO) for Pentair (PNR) in 2023 stands at $619.2 million, marking a positive trend. A positive CFO suggests that the company is generating sufficient cash from its core operations to fund its operating expenses, dividends, and potential reinvestments. Historically, Pentair has had fluctuating CFO values, with a significant dip in 2012 and peaks in 2013 and 2014. The latest positive CFO thus indicates strong operational cash flow and adds 1 point in the Piotroski analysis, reflecting improved operating efficiency and financial health relative to certain years.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) measures the company's ability to use its assets to generate earnings compared to the previous year. An increasing ROA indicates a higher efficiency in asset utilization, making it a critical metric for evaluating financial performance.

Historical change in Return on Assets (ROA) of Pentair (PNR)

In 2023, Pentair's ROA increased to 0.0957 from 0.0859 in 2022, yielding a positive trend. This resulted in a 1 point addition in the Piotroski Analysis. Historically-looking at the company's last 20 years of operating cash flow, Pentair has had fluctuations but shows resilience during downturns, notably performing better during stronger economic environments. Additionally, using industry median benchmarks from 0.3154 in 2003 to 0.3492 in 2023, the company's focus must sharpen to competitive levels. Nonetheless, the upward movement in ROA from 2022 to 2023 compared favorably, signalling efficient asset management and positive utilization trends vis-à-vis recent historical norms.

Operating Cashflow are higher than Netincome?

Operating cash flow (OCF) higher than net income is crucial because it indicates that the company is generating sufficient cash to cover its net income, underscoring its quality of earnings and financial health.

Historical accruals of Pentair (PNR)

In 2023, Pentair's operating cash flow of $619.2 million is slightly lower than its net income of $622.7 million. This is not ideal as it suggests that the company's net income is not fully supported by cash flows, a potential red flag for the quality of earnings. Historically, Pentair has had fluctuating cash flows from operations, with some years showing stronger performance (like 2013 with $915.3 million) and others showing weaker results (like 2010 with $68 million). Over the last decade, their trend shows inconsistency, indicating periods of both strong and weak cash flow management. This is a negative indicator based on the Piotroski analysis, resulting in 0 points for this criterion.

Liquidity of Pentair (PNR)

Leverage is declining?

Change in Leverage compares the company's equity financing relative to its debt financing across two periods to assess financial stability.

Historical leverage of Pentair (PNR)

The leverage ratio for Pentair (PNR) increased from 0.315 in 2023, up from 0.3675 in 2022. This trend is considered adverse as it denotes greater reliance on debt financing, which can introduce higher financial risk during economic downturns. Over the last 20 years, Pentair's leverage peaked at 0.3972 in 2015 and hit a low of 0.1669 in 2017. The company might consider strategies to control its debt levels going forward.

Current Ratio is growing?

Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets. It's an important indicator of financial health, particularly in the ability to cover short-term liabilities.

Historical Current Ratio of Pentair (PNR)

The Current Ratio for Pentair (PNR) increased from 1.466 in 2022 to 1.6523 in 2023, indicating an improvement in liquidity and financial health. This upward trend is positive and suggests better capacity to meet short-term obligations, scoring 1 point on the Piotroski scale. Historically, the company's Current Ratio fluctuated, peaking at 2.1204 in 2010 and dipping to 1.2399 in 2021. Compared to the industry median of 1.7757 in 2023, Pentair is slightly lagging, which emphasizes the need for continued monitoring.

Number of shares not diluted?

This criterion evaluates the change in the number of shares outstanding, which reflects equity issuance or buybacks. Decreasing shares outstanding typically indicates share buybacks, suggesting higher EPS.

Historical outstanding shares of Pentair (PNR)

In 2023, Pentair's outstanding shares increased to 165,100,000 from 164,800,000 in 2022. This 0.18% rise suggests that shares were potentially issued rather than repurchased, resulting in a score of 0. Historical trends reveal fluctuations with marked increases between 2009 and 2013, while recent years have seen more stability.

Operating of Pentair (PNR)

Cross Margin is growing?

Gross margin represents the percentage of total revenue that exceeds the cost of goods sold. It measures the efficiency of production compared to revenue and is crucial for assessing profitability.

Historical gross margin of Pentair (PNR)

Pentair's gross margin has increased from 33.11% in 2022 to 37.01% in 2023. This positive trend indicates an improvement in production efficiency or product pricing power. This increase of 3.9 percentage points not only shows a significant strengthening compared to its own historical performance but also places Pentair above the industry median gross margin of 34.92% for 2023. The consistency observed over the past 20 years, including previous peaks at around 37%, elucidates Pentair's ability to maintain strong gross margins despite fluctuating market conditions. Given this notable improvement, Pentair earns 1 point for this criterion.

Asset Turnover Ratio is growing?

The criterion examines whether the company's efficiency in using its assets to generate revenue has improved or declined over the period.

Historical asset turnover ratio of Pentair (PNR)

Comparing the Asset Turnover of Pentair (PNR) from 0.736 in 2022 to 0.6309 in 2023, it is evident that the Asset Turnover has decreased. This trend is not favorable as it indicates a decline in the company's efficiency in utilizing its assets to generate revenue. Over the past 20 years, the Asset Turnover has shown some volatility, peaking at 1.029 in 2003 and reaching its lowest point of 0.4181 in 2016. The decline to 0.6309 in 2023 underscores the need for Pentair to address potential inefficiencies in asset utilization.


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