RMD 207.11 (+0.88%)
US7611521078Medical Devices & InstrumentsMedical Instruments & Supplies

Last update on 2024-06-07

ResMed (RMD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Analyze ResMed's (RMD) financial health using the Piotroski F-Score for 2023. Final score: 3/9. Key insights on profitability, liquidity, 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.
Learn more...

Short Analysis - Piotroski Score: 3

We're running ResMed (RMD) 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?
0
Operating Cashflow are higher than Netincome?
0
Leverage is declining?
0
Current Ratio is growing?
1
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

The Piotroski F-Score for ResMed (RMD) is 3 out of 9, showing weaknesses in many areas. Although the company demonstrates strong profitability with positive net income and cash flow, its decline in return on assets, leverage increase, and stock dilution raise concerns. Gross margin and asset turnover also declined slightly, hinting at waning operational efficiency.

Insights for Value Investors Seeking Stable Income

Despite a solid history of growth and profitability, ResMed's weak Piotroski score suggests caution. Investors might want to delve deeper into the reasons behind its declining operational efficiency and rising debt. It's worthwhile to monitor the company's efforts to improve these aspects before considering it a strong buy.

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

Profitability of ResMed (RMD)

Company has a positive net income?

Assessing net income reveals if a company is profitable or facing losses. Positive net income signals good financial health.

Historical Net Income of ResMed (RMD)

The net income for ResMed (RMD) in 2023 stands at $897,556,000, which is positive. Analyzing the additional 20-year data, ResMed's net income has displayed an increasing trend with few fluctuations, especially a remarkable leap from $457,290,000 in 2003 to $897,556,000 in 2023. This consistent upward trajectory signifies robust financial performance, hence, we assign a score of 1 to this criterion.

Company has a positive cash flow?

CFO evaluates a company's ability to generate its own cash flow, reflecting its overall financial health and operational efficiency.

Historical Operating Cash Flow of ResMed (RMD)

For 2023, ResMed's CFO stands at $693.299 million, a clear sign of positive cash flow from operations. Historically, ResMed has demonstrated considerable cash flow growth, with values such as $383.159 million in 2012, $802.255 million in 2020, and $693.299 million in 2023. This positive trend underscores an improved capability to fund operations, repay debts, and reinvest, which is crucial for long-term sustainability and growth.

Return on Assets (ROA) are growing?

Change in ROA indicates the change in profitability and efficiency in using assets to generate earnings. It's crucial for assessing operational improvement.

Historical change in Return on Assets (ROA) of ResMed (RMD)

ResMed's ROA decreased from 0.1587 in 2022 to 0.1515 in 2023, indicating a decline in profitability and operational efficiency. Over the last 20 years, their operating cash flow has shown significant growth, peaking at approximately $802.2 million in 2020. However, the industry median ROA, much higher in the range of 0.5037 to 0.5747, indicates ResMed is lagging behind. Given the decline this year, the trend for ResMed’s ROA is negative, earning a score of 0 in this criterion.

Operating Cashflow are higher than Netincome?

This criterion compares the operating cash flow with the net income to assess the quality of earnings. Higher operating cash flow than net income suggests robust earnings quality.

Historical accruals of ResMed (RMD)

For the year 2023, ResMed's operating cash flow is $693.3 million, which is lower than its net income of $897.6 million. As a result, ResMed's score for this criterion is 0. This trend indicates that the company has less cash earnings compared to its net income, raising concerns about the sustainability of its earnings quality. Comparing historical data, there have been years where operating cash flow was significantly higher than net income (e.g., the gap was narrower or even positive between 2010 and 2020), demonstrating a stronger precedent of cash-flow-based earnings quality. Additionally, in years where accruals were lower, the operating cash flow tended to have a better relationship with net income, suggesting manageable non-cash items during those periods.

Liquidity of ResMed (RMD)

Leverage is declining?

Change in Leverage involves comparing the debt levels of a company between two periods. A decrease in leverage typically indicates less financial risk and better financial health.

Historical leverage of ResMed (RMD)

The leverage for ResMed has increased from 0.1738 in 2022 to 0.2293 in 2023, indicating a rise in financial risk for the company. This increase in leverage means that ResMed is relying more on debt to finance its operations as compared to the previous year. Such an upward trend is unfavorable as it poses potential risks to the company's financial health. Over the last 20 years, the leverage ratio has fluctuated, with the highest being 0.311 in 2017 and the lowest being 0 in 2010. The current upward trend is concerning and suggests caution.

Current Ratio is growing?

Explain the criterion for ResMed (RMD) and why it is important to consider

Historical Current Ratio of ResMed (RMD)

The Current Ratio trend is quite significant as it serves as a crucial indicator of a company's short-term liquidity position, reflecting the ability to cover short-term obligations with short-term assets.

Number of shares not diluted?

The change in outstanding shares criterion assesses whether a company has increased or decreased its shares outstanding over the past year. A decrease is often viewed as positive.

Historical outstanding shares of ResMed (RMD)

In 2022, the number of outstanding shares for ResMed was 146,066,000, while in 2023, this number increased to 146,765,000. Therefore, the outstanding shares have increased by 699,000 shares, showing a growing trend. Over the last 20 years, ResMed's outstanding shares have generally fluctuated but have shown a consistent increase in recent years. This indicates a potential dilution effect, which may not be favorable for existing shareholders. Consequently, this does not merit a point under the Piotroski criterion.

Operating of ResMed (RMD)

Cross Margin is growing?

Gross Margin is an indication of a company's financial health and efficiency in controlling costs. It represents the percentage of revenue that exceeds the cost of goods sold (COGS). A higher gross margin signifies more efficiency and profitability as the company retains more profit from each dollar of sales. Evaluating changes in gross margin helps investors understand if a company is improving or deteriorating in managing its production costs relative to revenue.

Historical gross margin of ResMed (RMD)

In 2023, ResMed's gross margin was 0.5578, down from 0.5657 in 2022. Despite this decline, it's helpful to compare against the industry's median gross margin in 2023, which was 0.5549. ResMed's margin still surpasses the industry median, indicating strong relative performance. The historical data reveals that ResMed has maintained a consistently high gross margin above its industry median for years. Though it declined slightly this year, the company still shows robust cost control and profitability compared to peers. Yet, this specific Piotroski criteria sets a 0 score as the gross margin did not increase from the previous year.

Asset Turnover Ratio is growing?

The change in asset turnover ratio measures the company's efficiency in using its assets to generate sales. An increasing asset turnover ratio is a positive sign as it indicates improved efficiency.

Historical asset turnover ratio of ResMed (RMD)

Comparing the Asset Turnover ratios from 2023 (0.7129) and 2022 (0.7284), we observe a slight decline in efficiency, indicating a marginally decreased ability to use assets to generate revenue. Analyzing the historical asset turnover for ResMed, we see fluctuations but relative stability over the past 20 years. Despite annual variations, a consistently higher ratio ( > 0.7 since 2018) showcases resilience and strong asset utilization. Hence for 2023, this key metric will score 0 as the ratio slightly declined compared to the previous year, highlighting room for operational efficiency improvements.


Obligatory risk notice

We would like to point out that the contents of this website are for general information purposes only and do not constitute recommendations for the purchase or sale of specific financial instruments, and therefore do not constitute investment advice. In particular, marketstorylabs.com and its creators cannot assess the extent to which information / recommendations made on the pages correspond to your investment objectives, your risk tolerance and your ability to bear losses. Therefore, if you make any investment decisions based on information on the site, you do so solely on your own responsibility and at your own risk. This in turn means that neither marketstorylabs.com nor its creators are liable for any losses incurred as a result of investment decisions based on the information on the marketstorylabs.com website or other media used.