Last update on 2024-06-07

K+S (SDF.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analyze K+S (SDF.DE) with Piotroski F-Score for the year 2023. Final score: 5/9, highlighting profitability, liquidity, and leverage efficiency.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score is a financial measure ranging from 0 to 9 which assesses a company's strength based on 9 criteria like profitability and liquidity. For K+S (SDF.DE), the score is 5. They have positive net income (€210.2M), positive cash flow (€821M), and operating cash flow higher than net income, all of which show good profitability post-2020. However, ROA declined, indicating deteriorated efficiency. Their leverage dropped to zero, signaling reduced debt, but the current ratio fell, indicating a slight dip in liquidity. K+S reduced outstanding shares, which is positive, but gross margin and asset turnover both decreased.

Insights for Value Investors Seeking Stable Income

K+S (SDF.DE) scores 5 on the Piotroski F-Score, reflecting a mixed financial position. Positive net income, good cash flow, and reduced debt levels are strengths. However, declines in ROA, gross margin, current ratio, and asset turnover signal areas of concern. This stock may still be appealing given its positive cash flow and debt management, though potential investors should watch closely for improved efficiency and liquidity trends. Diversify in case these negatives impact future performance.

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

Profitability of K+S (SDF.DE)

Company has a positive net income?

Net income represents a company's total earnings or profit and indicates the company's profitability.

K+S AG reported a net income of €210.2 million for 2023, which is positive. Over the past 20 years, the net income has fluctuated significantly, with highs in 2021 at €2.94 billion and lows in 2020 at -€1.71 billion. The positive net income in 2023 indicates improved profitability post-2020, marking a beneficial trend for shareholders and investors. This earns K+S a point according to Piotroski's F-Score criteria.

Company has a positive cash flow?

The criterion checks whether the cash flow from operations (CFO) is positive. Positive CFO indicates that the company is generating adequate cash to sustain and grow its operations.

The Cash Flow from Operations for K+S (SDF.DE) in 2023 stands at €821 million, and it is indeed positive. Therefore, according to the Piotroski Score criterion, 1 point is awarded for 2023. This positive cash flow suggests that K+S has healthy operational efficiencies. Comparing with its historical data from the last 20 years, there have been fluctuations, with years like 2016 (€445 million) and 2021 (€1.39 billion) showing substantial increases, while 2007 (€-108 million) displayed negative cash flow. The consistency of mostly positive cash flows, along with significant year-on-year variations, indicates that while the company largely maintains operational profitability, it does encounter cyclical fluctuations consistent with the industry dynamics.

Return on Assets (ROA) are growing?

Change in ROA measures the evolution of a company's return on assets, indicating efficiency improvements or deteriorations in the use of resources.

Comparing the ROA of 0.0217 in 2023 with 0.1621 in 2022, we observe a significant decrease. This is not favorable for K+S (SDF.DE) as it suggests that the company has become less efficient in generating returns from its assets. Historically, over the last 20 years, the company's ROA has fluctuated, and the current ROA is notably below the industry median of 0.3092 in 2023. This declining trend sets the score to 0 for this criterion, highlighting the need for the company to address underlying issues leading to this inefficiency.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income

K+S (SDF.DE) shows an Operating Cash Flow of €821 million compared to a Net Income of €210.2 million in 2023. This indicates a significant disparity where operating cash flow is higher than net income, thus earning 1 point according to Piotroski's criteria. This trend is favorable as it suggests that the company's core operations are generating more cash than what is reflected in the net income, indicating efficient operational management. Historical data shows this is a recurring theme for K+S, with deviations primarily in economically challenging years.

Liquidity of K+S (SDF.DE)

Leverage is declining?

Change in Leverage refers to the difference in a company's financial leverage ratio year over year. Leverage measures the level of a company's debt relative to its equity.

For K+S (SDF.DE), the leverage decreased from 0.0323 in 2022 to 0 in 2023, earning the company a point in this criterion. This decline in leverage indicates that K+S has reduced its debt relative to its equity, which is generally positive as it implies a lower financial risk. Over the past two decades, the company's leverage fluctuated significantly, peaking in 2015 at 0.2751 and eventually reaching zero in 2023. This downward trend suggests a strategic shift towards a more conservative capital structure, which could enhance financial stability and investor confidence.

Current Ratio is growing?

The Current Ratio is a key indicator of a company's ability to pay short-term liabilities with short-term assets.

Comparing K+S's (SDF.DE) Current Ratio for the years 2022 and 2023 reveals a decrease from 2.3986 in 2022 to 2.1432 in 2023. This decrease suggests a marginal decline in the company's liquidity position. Historically, K+S has maintained a Current Ratio above the industry median, highlighting its robustness in meeting short-term obligations compared to its peers. Nevertheless, the recent year's slight dip is concerning, though it does not significantly diverge from K+S's strong liquidity history overall. Therefore, it's essential to closely monitor this metric in the coming years to observe any prolonged trends.

Number of shares not diluted?

Change in shares outstanding indicates whether the company has issued additional shares, which can dilute existing shareholders, or repurchased shares, which generally enhances shareholder value.

The outstanding shares for K+S (SDF.DE) decreased from 191,400,000 in 2022 to 187,300,000 in 2023. This reduction of 4,100,000 shares suggests a share buyback or other corporate strategy aimed at enhancing shareholder value. Historically, for the past 20 years, K+S's outstanding shares have shown minimal fluctuations, with a notable increase in 2009. This recent decrease offsets prior stagnation, thus enhancing earnings per share and potentially increasing the stock price in the long term. Hence, add 1 point for this criterion.

Operating of K+S (SDF.DE)

Cross Margin is growing?

Change in Gross Margin compares the difference in gross margin ratios between two periods, indicating financial health. A rising gross margin often points to improved efficiency or pricing power.

In 2023, K+S's Gross Margin was 0.1456, a significant drop from 0.4329 in 2022. This decrease suggests deteriorating efficiency or increased costs. Despite fluctuations, K+S's historical gross margin averages higher than the industry median but has declined notably. Over the past 20 years, the company's highest gross margin was 0.7876 in 2021, while the lowest was -0.71 in 2020. The industry's median gross margin has remained relatively stable, fluctuating marginally around 0.31. Given this substantial decline in 2023, this criterion would score 0, reflecting a negative trend.

Asset Turnover Ratio is growing?

This criterion measures how efficiently a company is using its assets to generate sales. A higher ratio indicates better performance.

Comparing the Asset Turnover of 0.4 in 2023 with 0.6099 in 2022, we can see that there is a decrease. The trend has shown a decline from 0.6099 to 0.4, an observable drop of approximately 34.4%. This reduction suggests a less efficient use of assets to generate sales in 2023. Therefore, no points are added for this criterion, and it is set to 0. Historical data underscores variability, peaking at 1.4893 in 2008 and hitting a trough of 0.2563 in 2020, reflecting operational challenges.