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Last update on 2024-06-05

PPG Industries (PPG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

PPG Industries (PPG) achieves an impressive Piotroski F-Score of 8/9 for the year 2023, reflecting its strong financial health and 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: 8

We're running PPG Industries (PPG) 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?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score of PPG Industries (PPG) is a remarkable 8 out of 9, indicating a strong financial position. This high score is based on several positive indicators such as positive net income, increasing cash flow from operations, an improved return on assets, operating cash flow higher than net income, declining leverage, share repurchases, growing gross margin, and increasing asset turnover. The only criterion where PPG fell short is the Current Ratio, which slightly decreased from 2022 to 2023, indicating a potential concern with liquidity management. Overall, PPG has shown sturdy financial performance over the past 20 years, marked by efficient cash management, profitability, and prudent debt management.

Insights for Value Investors Seeking Stable Income

Given the high Piotroski F-Score, PPG Industries (PPG) appears to be a strong and potentially undervalued investment. The company's robust financial health, as evidenced by its consistent profitability, efficient cash flow management, decreasing leverage, and focus on share repurchases, indicates it is well-managed and financially stable. While there is a slight concern with the decreasing Current Ratio, the overall financial indicators suggest that PPG could be a worthwhile stock to consider for investment. Investors looking for a company with a solid financial standing and a history of stable earnings might find PPG Industries an attractive option.

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

Profitability of PPG Industries (PPG)

Company has a positive net income?

Net income is a vital criterion in the Piotroski Analysis as it reflects a company's profitability. A positive net income is essential for a high score as it indicates financial health.

Historical Net Income of PPG Industries (PPG)

For 2023, PPG Industries (PPG) recorded a net income of $1.27 billion. This is clearly a positive figure. Over the last 20 years, PPG Industries has demonstrated consistent profitability, except for minor fluctuations. The 2023 net income figure ranks among the top quartile compared to past records, showcasing the company's stable earnings trend. Accordingly, PPG earns 1 point for a positive net income under the Piotroski Analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the amount of cash generated by a company’s regular operating activities. This is a vital measure of a company's financial health.

Historical Operating Cash Flow of PPG Industries (PPG)

In 2023, PPG Industries reported a positive Cash Flow from Operations (CFO) of $2.411 billion. This is a good sign as it indicates that PPG’s core business activities are generating sufficient cash. Notably, this CFO value marks the highest in the past two decades, surpassing previous records such as $2.13 billion in 2020. This trend showcases strong financial performance and efficient cash management, earning PPG Industries an additional point in the Piotroski Analysis.

Return on Assets (ROA) are growing?

The criterion is measuring the change in Return on Assets (ROA) from one year to the next.

Historical change in Return on Assets (ROA) of PPG Industries (PPG)

PPG Industries (PPG) saw an increase in its ROA from 0.0487 in 2022 to 0.0599 in 2023, which implies improved profitability. Adding 1 point for this trend is justified. Over the last 20 years, the company's operating cash flow has generally shown an upward trend, suggesting consistent operational efficiency. However, the industry median ROA has consistently been substantially higher, remaining around 0.30, indicating that PPG still lags behind its peers in terms of asset efficiency.

Operating Cashflow are higher than Netincome?

The criterion measures whether a company's operating cash flow is greater than its net income.

Historical accruals of PPG Industries (PPG)

In 2023, PPG Industries reported an operating cash flow of $2.41 billion and a net income of $1.27 billion. Since the operating cash flow is higher than the net income, this indicates a stronger cash position and suggests that the company is generating enough cash from its operations to cover its profitability. This is a positive sign and adds 1 point in the Piotroski analysis for PPG Industries. Additionally, historical data over the last 20 years shows that PPG has generally maintained a higher operating cash flow compared to net income, reinforcing the trend. This trend is considered good as it indicates healthy cash management and operational efficiency.

Liquidity of PPG Industries (PPG)

Leverage is declining?

Change in Leverage measures any improvement or deterioration in the company's capital structure by examining the ratio of debts to equity.

Historical leverage of PPG Industries (PPG)

In 2022, PPG Industries had a Leverage of 0.3441, which decreased to 0.2943 in 2023. This indicates a positive trend as Leverage has decreased, earning the company 1 point in this Piotroski criterion. Historically, PPG's Leverage has shown fluctuations but has generally remained within a reasonable range. The reduction in 2023 is a sign of improved financial stability and a stronger balance sheet, demonstrating prudent management of debt levels. This downward shift from the previous year is a favorable development and suggests healthy financial practices.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets. It is important because it gives insights into the financial stability of an entity.

Historical Current Ratio of PPG Industries (PPG)

Comparing the Current Ratio of 1.4703 in 2023 with the Current Ratio of 1.5194 in 2022, it is evident that the Current Ratio has decreased. This decrement sets the score to 0 for this criterion. Over the last 20 years, PPG Industries' Current Ratio has generally trailed the industry median, reflecting a trend where liquidity management is a concern, especially given its peak Current Ratio at 1.947 in 2010 against the industry median of 2.0179 in the same year.

Number of shares not diluted?

This criterion compares the number of outstanding shares year-over-year to determine if a company is regularly repurchasing its shares, which can indicate strong financial health.

Historical outstanding shares of PPG Industries (PPG)

The Outstanding Shares for PPG Industries have shown a varied trend over the past 20 years, hitting a peak of 345,822,785 in 2004 and steadily decreasing until they reached 236,000,000 in 2023. Specifically, between 2022 and 2023, the outstanding shares slightly decreased from 236,100,000 to 236,000,000. This marginal decline suggests that the company is focusing on share repurchases, indicating that it is in a solid financial position. Hence, under this criterion, PPG Industries would earn a point and this trend can be considered favorable. Over the last two decades, a steady reduction in shares also implies a disciplined approach to capital allocation.

Operating of PPG Industries (PPG)

Cross Margin is growing?

Gross Margin reflects the portion of revenue that exceeds the cost of goods sold, indicating profitability.

Historical gross margin of PPG Industries (PPG)

The gross margin for PPG Industries has increased from 0.3714 in 2022 to 0.4111 in 2023. This increase is significant given the industry median gross margin of 0.3018 for 2023. The rising gross margin suggests improved efficiency in production or higher pricing power, which is a positive indicator for profitability. Comparing the historical trend, this marks a recovery from the dip in 2022 and aligns more closely with higher margins in earlier years like 2016's 0.4534. Consequently, according to the Piotroski Score criteria, PPG Industries earns 1 point for this improvement, reflecting a positive trend in gross margin expansion.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in using its assets to generate sales, and is calculated by dividing sales by total assets.

Historical asset turnover ratio of PPG Industries (PPG)

The asset turnover ratio for PPG Industries (PPG) increased from 0.8387 in 2022 to 0.8608 in 2023, signaling improved efficiency in asset utilization. This is generally seen as positive as it indicates that the company is generating more revenue per dollar of assets. Analyzing the last 20 years, the trend peaked in 2006 at 1.1803 and reached its lowest point in 2020 at 0.7425. The recent increase demonstrates a reversal of the downward trend observed since 2019.


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