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Last update on 2024-06-07

Pinnacle West Capital (PNW) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Piotroski F-Score analysis for Pinnacle West Capital (PNW) for 2023. Final score: 5/9. Assessing profitability, liquidity, operational 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 Pinnacle West Capital (PNW) 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?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score assesses Pinnacle West Capital's (PNW) financial strength based on 9 criteria of profitability, liquidity, and operating efficiency, yielding a score from 0 to 9. PNW's 2023 Piotroski Score is 5, indicating a moderate financial position. Successes include a positive net income of $501.557 million, robust operational cash flow of $1.207 billion, a favorable debt-to-asset ratio, OCF exceeding net income, and improved asset turnover ratio. On the downside, PNW's ROA declined, its current ratio dropped, shares outstanding increased, and the gross margin slightly decreased.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 5, Pinnacle West Capital (PNW) shows a balanced mix of strengths and weaknesses. The company is profitable with strong cash management and stable financial health in terms of leverage, but it also faces challenges in operational efficiency and liquidity. For investors, PNW could be a cautious but potentially rewarding consideration, especially if its areas of weaknesses can be strategically addressed and improved. It may be worth further investigation to gauge long-term growth potential and robustness against market fluctuations.

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

Profitability of Pinnacle West Capital (PNW)

Company has a positive net income?

This criterion evaluates whether Pinnacle West Capital's (PNW) net income for the year 2023 is positive. A positive net income indicates profitability, which is vital for assessing the company's financial health.

Historical Net Income of Pinnacle West Capital (PNW)

In 2023, Pinnacle West Capital (PNW) reported a net income of $501,557,000, which is positive. In the context of Piotroski analysis, this adds 1 point to the score, signaling a favorable trend in profitability. Over the past 20 years, PNW demonstrated resilience, with net income fluctuating but generally maintaining a positive trajectory, barring a notable dip in 2009. This consistent profitability underscores the company's robust business model and signifies a healthy financial stance.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) criterion assesses the company’s ability to generate cash inflows from its core business operations, which is critical for sustainable growth and financial stability.

Historical Operating Cash Flow of Pinnacle West Capital (PNW)

In 2023, Pinnacle West Capital (PNW) has reported a positive CFO of $1,207,697,000, which is a favorable indicator. Historically, over the last 20 years, PNW's operating cash flow has shown a generally consistent upward trend with a few fluctuations. For instance, in 2019, the CFO was slightly lower at $956.73 million but then recovered to $1.24 billion in 2022. This positive cash flow points to a robust operating performance and grants Pinnacle West Capital a full point in this criterion.

Return on Assets (ROA) are growing?

Return on Assets (ROA) is a key financial metric that indicates the profitability relative to total assets. A stable or increasing ROA suggests efficient asset utilization, crucial for assessing management effectiveness and company performance.

Historical change in Return on Assets (ROA) of Pinnacle West Capital (PNW)

In 2022, Pinnacle West Capital had an ROA of 0.0216, which slightly decreased to 0.0212 in 2023. This regression implies a marginal increase in asset usage without equivalent profit generation, leading to a decline of 0.0004. Despite the drop, over the twenty-year span, PNW has remained significantly below the industry median, which ranged between 0.5374 in 2003 and 0.4109 in 2023. The significant gap further illustrates areas for improved efficiency. Consequently, according to Piotroski’s criteria, Pinnacle West Capital would receive a score of 0 for this period, spotlighting areas needing strategic competitive adjustments.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a critical measure of a firm's financial health. High operating cash flow compared to net income signifies strong earnings quality and effective cash management.

Historical accruals of Pinnacle West Capital (PNW)

In 2023, Pinnacle West Capital (PNW) reported an operating cash flow (OCF) of $1.207 billion, significantly higher than its net income of $501.557 million. This yields a point for OCF exceeding net income, suggesting competent cash management and strong earnings quality. The recent pattern exemplifies a prudent equilibrium towards robust cash flows over accrued income, reinforcing investor confidence. Historical data illuminates consistent trends in operational cash flow, witnessing considerable growth from $901.83 million in 2003 to $1.207 billion in 2023, underpinning Pinnacle's resilient cash generation capabilities.

Liquidity of Pinnacle West Capital (PNW)

Leverage is declining?

Change in leveraged measures the ratio of total debt to total assets. A decrease indicates lower financial risk.

Historical leverage of Pinnacle West Capital (PNW)

For Pinnacle West Capital (PNW), the leverage ratio increased from 0.3688 in 2022 to 0.3548 in 2023. As the leverage ratio decreased in 2023, it suggests an improvement in the company's financial stability and risk profile. According to the historical data, PNW's leverage has fluctuated over the past years, reaching its peak in 2022. This recent trend of decreasing leverage is a positive signal, reflecting lower financial risk. Thus, according to the Piotroski Analysis criterion, this would earn PNW 1 point.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to cover its short-term obligations with its short-term assets. It is critical for assessing a firm's liquidity.

Historical Current Ratio of Pinnacle West Capital (PNW)

In 2023, Pinnacle West Capital (PNW) had a current ratio of 0.6669, a drop from 0.9934 in 2022. This indicates a decrease in liquidity, which can be concerning because the company may face difficulties meeting short-term liabilities. Analyzing the last 20 years, PNW's current ratio has hovered around 0.6447 and 1.011. Moreover, when compared to the industry median ratio, typically higher, PNW's liquidity appears weaker. With this decreasing trend in the current ratio from 2022 to 2023, we must assign 0 points for this criterion.

Number of shares not diluted?

Change in Shares Outstanding measures whether a company is issuing new shares to raise capital or buying back its own shares. An increase in outstanding shares often means the company is diluting its existing shares, which can be a red flag for investors.

Historical outstanding shares of Pinnacle West Capital (PNW)

In 2023, Pinnacle West Capital (PNW) had 113,442,000 outstanding shares compared to 113,196,000 in 2022, indicating an increase in shares by 246,000. According to the Piotroski F-Score methodology, since there was an increase in the number of shares, it scores 0 points for this criterion. The 20 years of data shows that Pinnacle West Capital's outstanding shares have generally increased over the years, peaking at 113,442,000 in 2023. This consistent issuance of new shares might reflect the company's ongoing need for capital, potentially signaling a lack of sufficient internal funds or a strategic choice to leverage shareholder equity over other forms of financing. Therefore, this trend is generally considered bad for this specific criterion as it shows dilution of existing shares.

Operating of Pinnacle West Capital (PNW)

Cross Margin is growing?

Analyzing the change in gross margin focuses on the efficiency and profitability in the company's core operations. A higher gross margin indicates better cost management and pricing strategy.

Historical gross margin of Pinnacle West Capital (PNW)

The Gross Margin for Pinnacle West Capital (PNW) in 2023 stands at 0.3928, slightly down from 0.395 in 2022, marking a decrease. This decrease indicates a marginal dip in the company's operational efficiency and profitability from the previous year. Examining the historical data, PNW's twenty-year gross margin trend shows a significant decline from its peak of 0.7027 in 2005. Comparatively, the industry median gross margin has demonstrated resilience, rising from 0.3499 in 2012 to 0.4109 in 2023. Hence, for the Piotroski F-Score criteria on gross margin change, PNW receives 0 points due to the decrease.

Asset Turnover Ratio is growing?

The criterion compares the Asset Turnover ratios year-over-year to gauge efficiency improvements. Higher ratios are indicative of better revenue generation per unit of asset.

Historical asset turnover ratio of Pinnacle West Capital (PNW)

In 2023, Pinnacle West Capital (PNW) reported an Asset Turnover ratio of 0.1982 compared to 0.1934 in 2022. This marks an increase in PNW’s asset efficiency, earning it 1 point according to the Piotroski Analysis. Over the last 20 years, PNW's Asset Turnover peaked at 0.3138 in 2003 and has shown a decreasing trend, reflecting occasional improvements but generally declining efficiency. The observed uptick in 2023 is a positive sign amidst the long-term depreciation.


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