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Last update on 2024-06-06

SLB (SLB) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Analyze the 2023 Piotroski F-Score for SLB (SLB) with an excellent score of 8 out of 9, highlighting strong 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.
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Short Analysis - Piotroski Score: 8

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

The Piotroski F-Score is a tool that scores a company from 0 to 9 based on nine financial criteria, evaluating its profitability, liquidity, and operating efficiency. SLB (SLB) scored 8 out of 9, indicating a strong financial position. It has shown positive net income, positive cash flow, and improving return on assets, among other strengths. There were only two areas of concern: increasing leverage and shareholder dilution in 2023.

Insights for Value Investors Seeking Stable Income

Based on the analysis using the Piotroski F-Score, SLB (SLB) appears to be a strong stock with a score of 8 out of 9. This suggests it has a solid financial foundation and strong operational efficiency. However, potential investors should be cautious of its increasing financial leverage and growing number of outstanding shares. Overall, it might be worth considering for further investment research due to its strong financial indicators.

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

Profitability of SLB (SLB)

Company has a positive net income?

Net income is a crucial metric as it indicates a company's profitability. A positive net income suggests the company is making more than it spends.

Historical Net Income of SLB (SLB)

SLB's net income for 2023 stands at $4.203 billion, a positive figure. This marks an improvement from previous years, showing strong recovery from the losses in 2016 to 2019 (e.g., -$16.87 billion in 2016 and -$1.505 billion in 2017). The continued positive trend since 2020 highlights effective financial management and strategic positioning post-pandemic. Therefore, for the Piotroski score, this criterion adds 1 point.

Company has a positive cash flow?

Cash Flow from Operations is the cash generated from the core business activities of a company. It is important because it shows if the core operations are generating enough cash to sustain the business.

Historical Operating Cash Flow of SLB (SLB)

In 2023, SLB's Cash Flow from Operations (CFO) stands at $6.637 billion, a positive figure. A positive CFO indicates that the company's core business operations are generating sufficient cash, an essential factor for business sustainability. Historically, judging from the last 20 years of data, the CFO has generally been positive with some fluctuations. Notable peaks were observed in 2007 at $6.259 billion and in 2013 at $9.786 billion. There was a significant drop in 2020 to $2.944 billion likely attributable to the COVID-19 pandemic's impact on the global economy. The rebound to $6.637 billion in 2023 suggests a recovery and improved operational efficiency. Thus, SLB earns 1 point for having a positive CFO, signifying financial health and stability.

Return on Assets (ROA) are growing?

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

Historical change in Return on Assets (ROA) of SLB (SLB)

Return on Assets (ROA) is a critical financial metric that measures how efficiently a company is utilizing its assets to generate profit. It is calculated by dividing net income by total assets. For SLB, monitoring year-over-year changes in ROA is essential, as an increasing ROA indicates improving profitability and resource utilization, while a decreasing ROA may suggest inefficiencies or challenges in asset management.

Operating Cashflow are higher than Netincome?

This criterion requires the Operating Cash Flow to be higher than the Net Income. It is essential as it ensures that net earnings are of high quality, backed by actual cash not skewed by account adjustments or non-cash items.

Historical accruals of SLB (SLB)

For SLB (SLB) in 2023, the Operating Cash Flow stands at $6,637,000,000, while the Net Income is $4,203,000,000. Hence, the Operating Cash Flow surpasses the Net Income, indicating a healthy cash generation from operations that supports the company's earnings. This yields a point on the Piotroski Scale. From 2003 to 2023, the fluctuating trends in Operating Cash Flow and Net Income show that the company, despite facing phases of lower net income (even negative in years such as 2016 and 2017), managed to maintain or rebound its operational cash levels. Particularly, in 2023, the significant gap between Operating Cash Flow and Net Income highlights the robustness in liquidity and operational efficiency, marking a positive trend.

Liquidity of SLB (SLB)

Leverage is declining?

Change in leverage evaluates a company's financial risk and debt management efficiency by comparing year-to-year leverage ratios.

Historical leverage of SLB (SLB)

In 2022, SLB had a leverage ratio of 0.2456, which rose to 0.2261 in 2023. Consequently, their leverage has increased, indicating higher financial risk. Over the last two decades, SLB's leverage ratio has generally experienced fluctuations, hitting a low of 0.1066 in 2010 and a high of 0.3779 in 2020. The current trend of increasing leverage doesn't bode well for the company's financial strength and attractiveness to investors, thereby meriting a score of 0 according to the Piotroski F-score criteria.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. It is calculated as current assets divided by current liabilities. A higher ratio indicates better liquidity.

Historical Current Ratio of SLB (SLB)

SLB's current ratio has increased from 1.2484 in 2022 to 1.3227 in 2023, which is a positive trend and warrants an additional point. This improvement in liquidity suggests that SLB has become better positioned to cover its short-term liabilities, which is crucial for maintaining operational stability. Over the last 20 years, the industry median has consistently been higher than SLB's ratio. For example, in 2022, the industry median was 1.9295, significantly higher than SLB's 1.2484. While the increase in SLB's current ratio is commendable, it still lags behind the industry median, indicating room for further improvement.

Number of shares not diluted?

The criterion assesses whether the company has reduced its shares outstanding year-over-year, indicating less shareholder dilution, which is generally favorable.

Historical outstanding shares of SLB (SLB)

The Outstanding Shares for SLB increased from 1,416,000,000 in 2022 to 1,425,000,000 in 2023. According to Piotroski Analysis, this is not favorable because it signifies shareholder dilution. Instead of reducing its shares outstanding, SLB issued more shares. The 20-year historical data shows a general increasing trend in shares outstanding, with fluctuations, suggesting the company has been diluting ownership over time. Therefore, for this criterion, SLB scores 0 points.

Operating of SLB (SLB)

Cross Margin is growing?

Gross Margin represents the percentage of total revenue that the company retains as gross profit after incurring the direct costs associated with producing the goods and services sold. An improvement in Gross Margin means that the company is becoming more efficient at converting revenue into actual profit, a crucial indicator of financial health.

Historical gross margin of SLB (SLB)

In 2023, SLB reported a Gross Margin of 0.1981, an increase from 0.1837 in 2022. This translates to an improvement of approximately 7.8%, signifying better cost management and operational efficiency. For broader context, over the past 20 years, the Gross Margin's performance shows a variety of trends with peaks and troughs, evident from a high of 0.3349 in 2007 to a low of 0.1102 in 2020 due to various market conditions. This upward trend in 2023 is encouraging as it possibly indicates a recovery phase for the company. When benchmarked against the industry's median Gross Margin of 0.2368 in 2023, SLB falls short, which suggests that while improving internally, SLB still lags behind the industry standard. Nonetheless, for Piotroski’s F-score, SLB earns 1 point for improving its Gross Margin year over year.

Asset Turnover Ratio is growing?

The Asset Turnover ratio evaluates how efficiently a company uses its assets to generate sales, which is crucial for its operational performance.

Historical asset turnover ratio of SLB (SLB)

SLB's Asset Turnover has increased from 0.6637 in 2022 to 0.7275 in 2023, garnering one point according to the Piotroski criteria. This improvement indicates a marginally better efficiency in utilizing its assets to generate sales. Historically, SLB saw a peak turnover of 0.9401 in 2006, reflecting a significantly more efficient period. The recent trend reverses the lows of 0.3811 observed in 2016 and represents a resilient rebound up from the decade-low. The figure for 2023 is a promising uptrend, signaling good asset utilization practices.


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