Last update on 2024-06-05

Kering (PPX.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Analyze Kering (PPX.DE) Piotroski F-Score for 2023. Detailed financial insights: profitability, liquidity, and efficiency metrics. Final score: 6/9.

Short Analysis - Piotroski Score: 6

We're running Kering (PPX.DE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score system helps investors evaluate the strength of a company's financial position by scoring it on nine different criteria. Kering (PPX.DE) gets a Piotroski F-Score of 6 out of 9 based on factors such as profitability, liquidity, and operating efficiency. 1. **Profitability**: It has positive net income (€2.98 billion) and positive operating cash flow (€4.46 billion), but its return on assets decreased from the previous year, losing a potential point. 2. **Liquidity and Leverage**: Kering showed a positive but slight increase in its current ratio, reflecting better short-term liquidity. However, its leverage increased, indicating higher financial risk. 3. **Operating Efficiency**: The gross margin improved slightly showing better cost management, but the asset turnover ratio fell, suggesting lower efficiency in generating sales from its assets. 4. **Shareholder Friendliness**: Kering reduced its outstanding shares, which is a positive signal to investors.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 6, Kering is above average in terms of financial health and operating efficiency, but there are areas of concern. Its increased leverage and decreased return on assets and asset turnover ratio suggest some operational and financial risks. However, its positive net income, strong cash flow, increased gross margin, and efforts to reduce shares outstanding are promising. Given this mixed but generally favorable evaluation, Kering may be worth a closer look for disciplined investors who can tolerate some risk while seeking solid profitability and operational measures. Further, in-depth research and continuous monitoring are recommended for a well-informed investment decision.

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

Profitability of Kering (PPX.DE)

Company has a positive net income?

Net income indicates a company's profitability, demonstrating the effectiveness of management strategies and overall operational efficiency.

Kering (PPX.DE) has a net income of €2,983,000,000 in 2023, which is a positive figure. Since a positive net income is a sign of profitability and indicates that the company is generating more revenue than expenses, this results in adding 1 point to its Piotroski score. Additionally, observing Kering’s net income trajectory over the past two decades reveals consistent profitability, with a significant peak in 2018 and steady figures in subsequent years. Despite fluctuations, the overall trend stays positive, which is generally favorable.

Company has a positive cash flow?

Cash flow from operations (CFO) refers to the money a company generates from its core business activities. It is a critical measure of financial health and operational efficiency.

The CFO for Kering (PPX.DE) in 2023 is €4.46 billion, showing a positive cash flow which is a promising sign of the company's operational efficiency and financial health. Over the past two decades, Kering has shown fluctuating CFO figures, but the general trend is upwards since 2015. Given this positive trend and the current substantial CFO, Kering's score for this criterion in the Piotroski analysis is 1 point.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) evaluates how effectively a company is using its assets to generate earnings. It is an important indicator of profitability.

Comparing 2023's ROA of 0.0792 to 2022's ROA of 0.1112 shows a decrease, indicating a less efficient use of assets year-over-year. Consequently, under the Piotroski F-Score, this criterion scores 0 points as the ROA has not increased. Historically, Kering's ROA has fluctuated significantly, but the recent downtick is notable. It's also significantly below the industry median returns on assets, which have consistently hovered around the 0.65 to 0.69 range over the past 20 years. The trend suggests a need for Kering to improve asset utilization and streamline operations to match or exceed industry standards.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a criterion in Piotroski analysis that indicates earnings quality. High earnings quality suggests that the company is generating more cash than its paper profits, accounting for potential non-cash items.

In 2023, Kering's operating cash flow was €4,459 million compared to a net income of €2,983 million. Because operating cash flow is higher than net income, this criterion is met, earning 1 point. This is favorable as it implies robust cash generation capability beyond its reported earnings, reflecting good earnings quality.

Liquidity of Kering (PPX.DE)

Leverage is declining?

The Change in Leverage criterion assesses the fluctuation in leverage ratios, which helps evaluate a company's financial risk and stability.

Leverage has increased from 0.2388 in 2022 to 0.3353 in 2023. This rise in leverage signifies that Kering is taking on more debt relative to its equity, increasing its financial risk. Historically, leverage ratios have mostly been stable but showed an upward trend starting in 2018, peaking significantly in 2023. This consistent increase is concerning as higher leverage can affect the company's ability to service its debt. Therefore, Kering earns 0 points for this criterion.

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. A higher ratio generally indicates a better liquidity position.

In 2023, Kering's current ratio stands at 1.3823, up from 1.371 in 2022. Despite this slight increase, Kering's current ratio has consistently remained below the industry median for the past 20 years. The industry median current ratio in 2023 was 1.56, while Kering's was 1.3823, suggesting that while Kering has improved its short-term liquidity, it still lags behind the industry norm. Nevertheless, the increase, although marginal, is a positive sign, earning Kering 1 point in this Piotroski analysis criterion. Historically, Kering's current ratio has seen fluctuations, reaching a low of 0.8085 in 2008 and a high of 1.603 in 2003. Compared to this historical range, the current ratio's 2023 figure indicates it is relatively stable but still necessitates further improvement to meet industry standards.

Number of shares not diluted?

Change in Shares Outstanding signifies whether the company has been repurchasing its own shares or issuing new shares. A decrease in outstanding shares often indicates a shareholder-friendly policy and higher earnings per share (EPS).

From 2022 to 2023, the Outstanding Shares of Kering decreased from 123,159,116 to 122,354,389. This reduction means that the company repurchased some of its shares, which signals a strong financial position and confidence from the management in the company's future prospects. Over the last 20 years, there have been fluctuations, but the trend generally shows a downward pattern in recent years, indicating a long-term strategy focused on value creation for shareholders. This reduction also tends to increase the value of each share if all other variables remain constant. Consequently, we add 1 point for this criterion, reflecting positively on the company's governance and financial metrics.

Operating of Kering (PPX.DE)

Cross Margin is growing?

The criterion of Change in Gross Margin requires comparing the gross margin of a given year with that of the previous year to identify improvements or declines. It illustrates a company's efficiency in production and cost management, showing how much profit the company retains on each unit of sales after covering the cost of goods sold.

Kering's gross margin has increased from 0.7468 in 2022 to 0.7629 in 2023. This is an upward shift of 1.61 percentage points, indicating better cost management and enhanced production efficiency. Over the last 20 years, Kering's gross margin saw substantial growth, starting at 0.3769 in 2003 and reaching 0.7629 in 2023, significantly outperforming the industry median gross margin, which stood at 0.688 in 2023. This consistent increase highlights Kering's strong operational capabilities and competitiveness within its industry. Therefore, 1 point is added according to the Piotroski F-Score.

Asset Turnover Ratio is growing?

Asset Turnover is calculated by dividing sales by total assets. This metric indicates how efficiently a company uses its assets to generate sales. A higher ratio signifies greater efficiency.

The Asset Turnover for Kering (PPX.DE) has decreased from 0.6261 in 2022 to 0.5196 in 2023, which indicates a decline in efficiency in using its assets to generate revenue. This marks a decrease of approximately 17%. An upward trend in Asset Turnover would merit a point under Piotroski's criteria, however, the downward trend observed suggests that Kering loses out on a point in this particular measure. Historically, for the past 20 years, Kering’s Asset Turnover Ratio has fluctuated significantly, ranging from a high of 1.9774 in 2003 to a low of 0.3878 in 2012. The recent figures are notably above the lowest point but significantly below the historical high, implying varying efficiency over time. Importantly, this decline in 2023 is not favorable.