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Last update on 2024-06-07

Richardson Electronics (RELL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Richardson Electronics (RELL) analysis using Piotroski F-Score for 2023, scoring 5/9. Evaluate financial health, profitability, liquidity, and efficiency of RELL.

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 Richardson Electronics (RELL) 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?
0
Return on Assets (ROA) are growing?
1
Operating Cashflow are higher than Netincome?
0
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score analyzes a company's financial strength on a scale of 0-9 based on 9 criteria, covering profitability, liquidity, and operating efficiency. Richardson Electronics (RELL) achieved a score of 5 out of 9. Despite positive net income and rising ROA (Return on Assets), RELL failed in generating a positive cash flow and having a cash flow higher than net income. The company's leverage is lower, meaning reduced financial risk, and its current ratio improved, showcasing better liquidity. However, there was an increase in shares outstanding leading to dilution, and the gross margin slightly declined. Despite this, the asset turnover ratio showed positive growth.

Insights for Value Investors Seeking Stable Income

Overall, Richardson Electronics (RELL), with a Piotroski score of 5, presents a mixed picture. The positive net income, lower leverage, improved current ratio, and improving asset turnover are encouraging. However, the negative cash flow and share dilution are concerning. Investors should consider looking into this stock further, keeping an eye on its ability to generate positive operational cash flows consistently and manage profits effectively to enhance overall financial health.

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

Profitability of Richardson Electronics (RELL)

Company has a positive net income?

Review if Richardson Electronics (RELL)'s annual net income was positive or negative in 2023. This indicator helps assess a company's profitability.

Historical Net Income of Richardson Electronics (RELL)

In 2023, Richardson Electronics (RELL) reported a net income of $22,333,000, which marks a positive trend. Over the last 20 years, the company's net income has varied significantly, with some years showing substantial losses, such as in 2003 (-$27,558,000) and 2009 (-$12,164,000). However, the recent positive net income signifies improved profitability. Therefore, according to the Piotroski score, this criterion earns RELL one point.

Company has a positive cash flow?

This criterion assesses whether Richardson Electronics (RELL) generates cash from its operational activities. A positive cash flow indicates healthy business operations.

Historical Operating Cash Flow of Richardson Electronics (RELL)

The Cash Flow from Operations (CFO) for Richardson Electronics (RELL) in 2023 is -$8,199,000. This indicates that the company is currently not generating positive cash flow from its core business operations. Historically, the last two decades have shown significant volatility in RELL's operating cash flows, with multiple periods of negative cash flow interspersed with positive periods. In 2022, the CFO was $1,911,000, showing a positive trend just a year ago before plunging into negative territory again in 2023. This is a concerning sign as consistently negative cash flow from operations could imply underlying operational inefficiencies or external market challenges. For this criterion, RELL scores 0 points.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) measures the efficiency of a company's management in generating profits from its assets. An increase indicates improved operational performance.

Historical change in Return on Assets (ROA) of Richardson Electronics (RELL)

Richardson Electronics' ROA increased from 0.1065 in 2022 to 0.1182 in 2023, signifying an incremental but positive trend. Although the company's ROA is improving, it remains below the industry median ROA of 0.2104 for 2023. This improvement suggests better operational efficiency compared to its past performance, yet it underlines a potential area for growth to align with industry standards. Historical analysis reveals fluctuations in operating cash flow, implying susceptibility to operational risks, but the recent trend remains upward.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income for Richardson Electronics (RELL)

Historical accruals of Richardson Electronics (RELL)

The company's operating cash flow for 2023 is -$8,199,000, while its net income stands at $22,333,000. This discrepancy means the operating cash flow is significantly lower than the net income, resulting in a score of 0 points following Piotroski's F-Score criteria, which requires operating cash flow to be higher than net income. Historically, the company's operating cash flow has shown significant fluctuations over the last 20 years, peaking at $24,331,000 in 2010, and plummeting to -$48,723,000 in 2012. Similarly, net income has also seen variability, with a high of $90,074,000 in 2011 and a low of -$27,558,000 in 2003. These variations highlight certain volatility in the company's ability to generate consistent cash flow from its operations, which might be a point of concern for long-term stability.

Liquidity of Richardson Electronics (RELL)

Leverage is declining?

The criterion assesses whether a company's leverage has decreased compared to the previous year. Lower leverage suggests reduced financial risk.

Historical leverage of Richardson Electronics (RELL)

For Richardson Electronics (RELL), the leverage ratio has decreased from 0.0106 in 2022 to 0.0072 in 2023. This decline in leverage is favorable, indicating that Richardson Electronics is experiencing lower financial risk and debt obligations. Historically, the company's leverage has been volatile, peaking at 0.5212 in 2003 and maintaining a steady decline since 2007, where it reached negligible levels up to 2021. Adding 1 point for this criterion is justified as the reduced leverage highlights improved financial health for the company.

Current Ratio is growing?

The current ratio measures a company's ability to cover its short-term liabilities with its short-term assets.

Historical Current Ratio of Richardson Electronics (RELL)

In 2023, Richardson Electronics (RELL) experienced an increase in its current ratio from 3.7182 in 2022 to 4.5938 in 2023. This rise suggests improved liquidity compared to the previous year. Historically, the company's current ratio is typically above the industry median, which was 2.3275 in 2022 and 2.0742 in 2023, underscoring its robust short-term financial health. Given this increase, which implies better coverage of short-term obligations, we add 1 point for this criterion.

Number of shares not diluted?

Change in Shares Outstanding signifies investor confidence and its dilution level, affecting EPS directly.

Historical outstanding shares of Richardson Electronics (RELL)

Comparing the Outstanding Shares of 13,475,000 in 2022 with 13,995,000 in 2023 shows an increase of 520,000 shares. This suggests a dilution of existing shares as total shares increased. Over the past 20 years, the outstanding shares reached their peak in 2007 at 17,667,000 and have had various peaks and troughs. The rise from 2022 to 2023 aligns with previous increases, indicating fluctuating investor confidence and capital-raising activities by the company. As the shares have increased, no point is added in this criterion, underscoring its negative connotation within the Piotroski framework.

Operating of Richardson Electronics (RELL)

Cross Margin is growing?

This criterion evaluates the company's ability to maintain or improve profitability at the production level. A higher gross margin indicates better cost control and pricing power.

Historical gross margin of Richardson Electronics (RELL)

The Gross Margin for Richardson Electronics decreased slightly from 0.3192 in 2022 to 0.3186 in 2023. Despite this marginal decline, it is worth noting that Richardson Electronics has consistently maintained a Gross Margin higher than the industry median over the past 20 years. The latest data for 2023 still positions the company significantly above the industry's median Gross Margin of 0.2104, demonstrating strong operational efficiency and resilience. Consequently, no point is added in this criterion for 2023. This trend can be interpreted as stable but not opportune enough to contribute positively to the Piotroski score this year.

Asset Turnover Ratio is growing?

Asset Turnover is a key indicator of a company's efficiency in using its assets to generate sales. Higher ratios indicate better performance.

Historical asset turnover ratio of Richardson Electronics (RELL)

From the provided data, Richardson Electronics (RELL) saw its Asset Turnover rise from 1.3348 in 2022 to 1.3902 in 2023. This increase in Asset Turnover suggests that the company has become more efficient in utilizing its assets to generate revenue. In concrete terms, for every dollar of assets, RELL produced approximately $1.39 in sales in 2023 versus $1.33 in 2022. This is a positive trend and adds 1 point to the Piotroski Score. Looking at the last 20 years, the Asset Turnover ratio has fluctuated significantly, but the recent upward trend from 1.1509 in 2021 to 1.3902 in 2023 highlights consistent improvement.


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