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Last update on 2024-06-06

Perrigo (PRGO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Perrigo (PRGO) gets a Piotroski F-Score of 7/9 for 2023, signaling strong financial health based on key profitability, liquidity, and operational efficiency criteria.

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: 7

We're running Perrigo (PRGO) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
0
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 analysis of Perrigo (PRGO) using the Piotroski F-Score shows it has a score of 7 out of 9. This model uses 9 different criteria focused on profitability, liquidity, and operating efficiency to evaluate a company's financial health. Perrigo scores points for having positive cash flow from operations, growing return on assets, operating cash flow exceeding net income, declining leverage, a decreasing number of shares, growing gross margin, and an increasing asset turnover ratio. However, the company took hits on net income because it reported a loss in 2023, and its current ratio decreased from the previous year, raising liquidity concerns.

Insights for Value Investors Seeking Stable Income

It looks like Perrigo (PRGO) is a fairly strong investment, with a Piotroski F-Score of 7 indicating a solid financial position. The company shows good cash generation, improved efficiency in asset use, and reduced leverage—all positive signs. However, there are concerns with consistent profitability and the recent drop in the current ratio, which means you'll need to keep an eye on its short-term liquidity. If you're considering investing, this stock seems promising but warrants a deeper look, especially into the factors affecting its net income and liquidity.

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

Profitability of Perrigo (PRGO)

Company has a positive net income?

Analyzing Net Income helps assess a company's profitability over a period. Positive net income indicates profitability whereas negative net income indicates a loss.

Historical Net Income of Perrigo (PRGO)

For 2023, Perrigo (PRGO) reported a net income of -$12.7 million. Thus, for the Piotroski scorecard, this criterion scores 0 points. Historically, Perrigo has shown fluctuating net income values, interspersed with both high profits and significant losses. Notably, 2016 and 2020 represent substantial losses. This trend suggests some volatility in Perrigo's profitability, raising potential red flags for investors.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the amount of cash generated by a company's normal business operations.

Historical Operating Cash Flow of Perrigo (PRGO)

For Perrigo (PRGO), the Cash Flow from Operations (CFO) for 2023 is $405.5 million, which is positive. According to the Piotroski F-score criteria, this adds 1 point to the company's score. Historically, the company has had fluctuations in its CFO, peaking in 2015 at approximately $1.198 billion and experiencing lower figures like $156.3 million in 2021. However, the positive CFO in 2023 shows a good sign of liquidity and operational efficiency. Thus, Perrigo scores 1 point for this criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) involves assessing whether a company has improved its profitability relative to its asset base compared to a previous period. This criterion is important as it helps to determine if the operational efficiency and profitability of a company have improved.

Historical change in Return on Assets (ROA) of Perrigo (PRGO)

Perrigo's ROA increased from -0.0131 in 2022 to -0.0012 in 2023. This is an improvement in the company's profitability. Although still in negative territory, the less negative ROA signifies a move towards profitability. Therefore, Perrigo earns 1 point for this criterion. Additionally, looking at the operating cash flow from the past 20 years, there's a trend of rising values, indicating increasing operational efficiency. However, when comparing Perrigo's ROA to the industry median, which is quite significantly higher in positive figures, Perrigo still trails behind industry standards.

Operating Cashflow are higher than Netincome?

Operating Cash Flow exceeding Net Income indicates a company's earnings quality. It suggests the company generates sufficient cash to cover its net earnings.

Historical accruals of Perrigo (PRGO)

In 2023, Perrigo (PRGO) reported an Operating Cash Flow of $405.5 million, significantly surpassing the Net Income of -$12.7 million. This yields a point per the Piotroski Score criteria. Observing historical data over 20 years, - The highest Operating Cash Flow was $1.19 billion in 2015. - The drastic dip in Net Income in 2016 hitting -$4.0128 billion was notable. - Most recently, the trends indicate strong cash generation capabilities, which is positively reassuring for investors. Graphing the two metrics highlights Operating Cash Flow's consistency, reaffirming financial robustness despite occasional net income volatility.

Liquidity of Perrigo (PRGO)

Leverage is declining?

Change in leverage refers to the variation in the company's leverage ratio over a period of time, crucial for assessing financial risk.

Historical leverage of Perrigo (PRGO)

In 2023, Perrigo (PRGO) reported a leverage ratio of 0.3361 compared to 0.3695 in 2022. This indicates that the company's leverage has decreased, thereby earning it an additional point according to the Piotroski F-score criteria. Historical data shows fluctuating leverage levels over the past 20 years, but the recent downward trend suggests an improvement in Perrigo’s financial stability and a potential reduction in default risk. This trend is positive for the company as it reflects better management of debt and financial obligations.

Current Ratio is growing?

The change in Current Ratio measures a company's ability to pay short-term obligations with its short-term assets. It is critical to assess liquidity.

Historical Current Ratio of Perrigo (PRGO)

For Perrigo (PRGO), the Current Ratio has decreased from 2.4424 in 2022 to 1.7859 in 2023. This trend is concerning as it reflects a diminished ability to cover short-term liabilities with short-term assets. Specifically, compared to the industry median, which is 2.1191 in 2023, Perrigo trails in liquidity. While the significant drop might suggest potential liquidity issues, it’s important to note that Perrigo's Current Ratio is still above the 1.5 threshold, commonly considered acceptable for short-term solvency. However, given the downward trend this year, it warrants close attention moving forward. Hence, no point is added.

Number of shares not diluted?

The change in shares outstanding is an indicator of how much dilution or buyback a company is implementing. A decrease suggests potential buybacks.

Historical outstanding shares of Perrigo (PRGO)

Given the data, the Outstanding Shares decreased drastically from 134,500,000 in 2022 to 0 in 2023. This is an unusual and extreme reduction, as companies rarely reduce their outstanding shares to zero. Over the last two decades, there have been fluctuations, and this points toward a massive buyback or some extraordinary event in 2023. Given this decrease, this criterion would yield a score of 1 point under typical conditions. However, such an extreme scenario warrants a closer inspection to understand the underlying reasons. Business professionals should investigate this anomaly further as it can signal significant corporate actions or misunderstandings in reporting.

Operating of Perrigo (PRGO)

Cross Margin is growing?

Gross Margin is a company's total sales revenue minus its cost of goods sold, divided by total sales revenue, and expressed as a percentage. It indicates the profitability of the core business activities.

Historical gross margin of Perrigo (PRGO)

In 2023, Perrigo's Gross Margin stood at 0.3609, compared to 0.3269 in 2022, representing an increase. This improvement earns Perrigo 1 point in the Piotroski Analysis scoring. Historically, Perrigo's Gross Margin has oscillated around these values with its highest in 2017 at 0.4002 and its lowest in 2004 at 0.2543. Despite the incremental gain in Gross Margin, it's vital to highlight that the 2023 margin still falls short of the Industry Median of 0.5013, suggesting there's room for improvement relative to broader industry performance.

Asset Turnover Ratio is growing?

The Asset Turnover ratio measures how effectively a company utilizes its assets to generate sales. It is calculated by dividing total revenue by average total assets. An increase in the asset turnover ratio implies better efficiency in asset utilization.

Historical asset turnover ratio of Perrigo (PRGO)

The Asset Turnover for Perrigo (PRGO) increased from 0.4152 in 2022 to 0.4266 in 2023, indicating an improvement. This rise of approximately 2.8% suggests that Perrigo has slightly enhanced its efficiency in using its assets to generate revenue. Historical data shows that the Asset Turnover has generally declined over the past 20 years, making this recent improvement a positive trend. The company earns 1 point for this criterion in the Piotroski analysis.


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