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Last update on 2024-06-07

Powell Industries (POWL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Powell Industries Piotroski F-Score Analysis 2023: Comprehensive insight with final score of 6/9. Review strengths in 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: 6

We're running Powell Industries (POWL) 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?
1
Leverage is declining?
1
Current Ratio is growing?
0
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

Powell Industries has been analyzed using the Piotroski F-Score system, which assesses profitability, liquidity, and operating efficiency. The company's overall score is 6 out of 9. Powell has shown strong profitability with positive net income and an increasing Return on Assets (ROA), and robust cash generation compared to net income. However, there are concerns regarding liquidity, as the current ratio has decreased, and leverage has slightly increased. Additionally, there was a marginal increase in the number of shares outstanding, and asset turnover has slightly declined despite improved gross margins.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Powell Industries (POWL) presents a mixed picture. The company’s strong profitability and cash flow generation ability demonstrate good financial health. However, concerns over liquidity and slight increases in leverage and share dilution should not be overlooked. As an investor, it may be worth keeping an eye on this stock, evaluating how the company addresses its liquidity and leverage concerns in the upcoming periods. Some caution is advised, but considering the Piotroski Score and the areas of strength, it's reasonable to consider POWL for further research or potential investment.

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

Profitability of Powell Industries (POWL)

Company has a positive net income?

Checking if the net income for Powell Industries is positive or negative and assigning a corresponding score in the Piotroski analysis.

Historical Net Income of Powell Industries (POWL)

In 2023, Powell Industries reported a net income of $54,525,000. This marks a substantial increase compared to previous years, particularly when you consider that just twenty years ago, the net income was $7,118,000. Over this period, apart from a few down years, the company has shown a remarkable trend of profitability and recovery. For example, in the financial crisis year of 2009, the company was able to generate a net income of $39,717,000. Hence, adding 1 point for a positive net income aligns well with the company’s strong financial returns over the years and indicates a healthy trend.

Company has a positive cash flow?

Assess the cash flow from operations (CFO). If the value is positive, the criterion is met and the Poz score increases by 1; otherwise, it remains unaltered.

Historical Operating Cash Flow of Powell Industries (POWL)

For Powell Industries (POWL), the CFO for 2023 stands at $182,553,000, clearly marking a positive figure. Historically, analyzing the past 20 years, it is evident that the company has displayed fluctuations in its operating cash flows. While there have been challenging years marked by negative CFO figures, including 2005 (-$21,189,000), and as recent as 2021 (-$30,461,000), the substantial positive CFO in 2023 suggests a strong operational performance. This trend secures a point for POWL. It indicates a robust recovery and efficient cash generation from core operations, which is indeed a good trend.

Return on Assets (ROA) are growing?

The criterion for Powell Industries (POWL) is to examine the change in Return on Assets (ROA) from the previous year to the current year. ROA is a measure of a company's profitability relative to its total assets, and it indicates how efficiently management is utilizing the company's assets to generate earnings.

Historical change in Return on Assets (ROA) of Powell Industries (POWL)

For Powell Industries, the ROA increased from 0.0296 in 2022 to 0.0875 in 2023. This significant improvement in ROA, more than doubling from the previous year, warrants a 1-point addition as per the Piotroski F-Score criteria. This trend demonstrates that the company has enhanced its ability to convert its assets into profits effectively. Additionally, when compared to the industry median ROA, which has been relatively stable around 0.2995 in 2023, Powell Industries still lags behind the broader industry. Despite this, the company's substantial YOY growth in ROA is a positive sign and indicates a potential path towards bridging this gap. The historical contrast against the last 20 years' data also underscores a substantial positive swing considering the managed increase from a net negative operating cash flow in some years to a positive one aligning with recent assets returns.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income criterion assesses the cash-generating efficiency of a company compared to its reported earnings. This measure is vital because it indicates whether the company can translate its revenues into actual cash flow, which is crucial for sustaining operations and growth.

Historical accruals of Powell Industries (POWL)

For Powell Industries, the Operating Cash Flow for 2023 is $182.55 million, while Net Income is $54.525 million. As the Operating Cash Flow is significantly higher than the Net Income, this trend highlights a strong ability to generate cash, earning a score of 1. Historical data supports this efficiency improvement, contrasting sharply from previous years like 2005, 2006, 2012, and 2015, where Operating Cash Flow was negative. Such robust cash flow positions Powell well for reinvestment and debt management, indicating a favorable standing.

Liquidity of Powell Industries (POWL)

Leverage is declining?

Change in Leverage measures the change in a company's financial leverage. It is important as it indicates how much debt the company is using to finance its assets.

Historical leverage of Powell Industries (POWL)

The leverage for Powell Industries increased from 0.0009 in 2023 compared to 0.0011 in 2022. When evaluating the Piotroski score, an increasing leverage usually suggests higher financial risk, which justifies a score of 0 for this criterion. Over the past 20 years, the leverage ratio has generally decreased, highlighting a long-term trend of reducing financial risk, despite the recent uptick in 2023.

Current Ratio is growing?

Change in Current Ratio for Powell Industries (POWL)

Historical Current Ratio of Powell Industries (POWL)

The Current Ratio for Powell Industries (POWL) has decreased from 1.9852 in 2022 to 1.5719 in 2023. The Current Ratio tracks a company's ability to cover its short-term obligations with its short-term assets. A decline is typically seen as a less favorable trend as it suggests a reduction in liquidity. According to historical data, this ratio reached its lowest in 2023, and when compared with the industry median, POWL's latest ratio underperforms, emphasizing a potential liquidity concern. Hence, no point is added for this criterion.

Number of shares not diluted?

Change in Shares Outstanding measures whether the company is issuing new shares or buying back existing ones. Buybacks can indicate confidence.

Historical outstanding shares of Powell Industries (POWL)

In 2023, Powell Industries saw its outstanding shares increase to 11,879,000 from 11,797,000 in 2022. This represents a marginal increase, suggesting that the company issued additional shares. Over the last 20 years, the shares have shown a generally increasing trend from 10,681,000 in 2003. However, smaller increases or decreases in certain years can indicate strategic maneuvers. The recent increase adds 0 points in this criterion under the Piotroski score, which can sometimes be viewed skeptically by investors who prefer share buybacks as a signal of management's confidence in the company's prospects.

Operating of Powell Industries (POWL)

Cross Margin is growing?

The criterion evaluates the change in the gross margin from one year to the next. An increase signifies better operational efficiency or cost management, thus deserving a higher score.

Historical gross margin of Powell Industries (POWL)

For Powell Industries (POWL), the gross margin increased from 0.1596 in 2022 to 0.211 in 2023. This uptick is significant as it demonstrates improved profit margins amidst operational activities. Over the past 20 years, Powell's gross margin has had fluctuations, peaking at 0.258 in 2010. Comparatively, the industry median gross margin has remained consistently higher. The latest increase in Powell's gross margin above the industry median marks a positive trend. Therefore, Powell receives a score of 1 for this criterion.

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's calculated by dividing sales by total assets.

Historical asset turnover ratio of Powell Industries (POWL)

In 2023, Powell Industries reported an Asset Turnover Ratio of 1.1228, a slight decline from 1.1459 in 2022. This decrease indicates a reduced efficiency in asset utilization. Over the past 20 years, the company has experienced varying asset turnover rates, with the highest in 2007 (1.9317) and the lowest in 2017 (0.9024). While the recent decrease is modest, it nonetheless results in a 0-point addition for this Piotroski F-Score criterion.


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