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Snap-on (SNA) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Snap-on (SNA) achieves a high Piotroski F-Score of 8/9 for 2023, reflecting robust financial health 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 Snap-on (SNA) 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?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

The Piotroski F-Score is a system that rates a company's financial position on a scale from 0 to 9 based on nine criteria related to profitability, liquidity, and leverage. Snap-on (SNA) achieved a high score of 8, signaling strong financial health. Snap-on shows positive and growing net income, positive cash flow from operations, and improving Return on Assets (ROA). Operating cash flow exceeds net income, which indicates strong earnings quality. The company’s leverage is decreasing, the current ratio is growing, and there is a reduction in outstanding shares, pointing to robust liquidity and financial prudence. However, the asset turnover ratio has slightly declined, suggesting room for improvement in asset utilization.

Insights for Value Investors Seeking Stable Income

Given Snap-on's high Piotroski F-Score of 8, it stands out as a strong candidate for investment. The company's consistent profitability, positive cash flows, and declining debt levels make it an attractive option. However, potential investors should take note of the slightly declining asset turnover ratio, which could be an area for improvement. Overall, Snap-on appears to be a sound investment for those focused on long-term growth and financial stability.

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

Profitability of Snap-on (SNA)

Company has a positive net income?

Net income is a company's total earnings, reflecting their profitability. Positive net income suggests the company is profitable.

Historical Net Income of Snap-on (SNA)

For the fiscal year 2023, Snap-on (SNA) reported a net income of $1.011 billion, marking a continuation of a positive trend. Over the last 20 years, Snap-on has consistently demonstrated an upward trajectory in net income, with figures rising from just $78.7 million in 2003 to over a billion dollars recently. This consistent increase is a robust indicator of the company's financial health and strategic success. To illustrate, in 2003, the net income was just $78.7 million. By 2012, it had jumped to $306.1 million and continued its growth to $911.7 million in 2022, culminating in $1.011 billion in 2023. This represents a compound annual growth rate (CAGR) of approximately 15%. Therefore, Snap-on's positive and growing net income over this period is a solid indicator of good financial health and earns a full point on the Piotroski score metric.

Company has a positive cash flow?

Cash Flow from Operations (CFO) assesses a company's cash inflows and outflows from core operating activities. Positive CFO is crucial as it indicates the company generates sufficient cash to maintain and grow operations without relying on external financing.

Historical Operating Cash Flow of Snap-on (SNA)

For Snap-on (SNA), the CFO in 2023 is $1,154,200,000, clearly positive. This continues a long-standing trend of positive CFO over the past 20 years, which has generally been on an upward trajectory. Notably, from 2015 onwards, the CFO numbers have consistently stayed above $500 million, peaking at $1,158,400,000 in 2023. Such strong and consistently positive cash flows highlight Snap-on's robust operational efficiency and its capacity to generate ample cash through its regular business activities. This is a favorable sign and merits a score of 1 according to the Piotroski analysis criteria.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures the improvement in the profitability of a company relative to its total assets.

Historical change in Return on Assets (ROA) of Snap-on (SNA)

For Snap-on (SNA), the ROA increased from 0.1328 in 2022 to 0.1393 in 2023. This 6.15% increase in ROA signifies an enhancement in Snap-on's efficiency in utilizing its assets to generate earnings. Historically, Snap-on's operating cash flow has shown a significant upward trend, from $177 million in 2003 to a remarkable $1.15 billion in 2023, supporting the positive trend in profitability. Compared to the industry, Snap-on's ROA is below the industry median of 0.322 in 2023. Despite not matching industry peers, the improvement in ROA demonstrates effective management in asset utilization, resulting in 1 point for this Piotroski criterion.

Operating Cashflow are higher than Netincome?

The criterion evaluates whether a company generates more cash from operations than it reports as net income. It indicates strong earnings quality.

Historical accruals of Snap-on (SNA)

During 2023, Snap-on (SNA) showcased an operating cash flow of $1,154.2 million compared to a net income of $1,011.1 million. This demonstrates a favorable ratio as operating cash flow exceeds net income, indicating efficient earnings quality. Historically, Snap-on has experienced a discernible trend in improving operating cash flows vis-a-vis net income. Each year, we observe closely aligned figures, suggesting robust financial health. For 2023, Snap-on secures a full point, reinforcing a positive indicator in the Piotroski F-Score evaluation.

Liquidity of Snap-on (SNA)

Leverage is declining?

Change in Leverage measures how much a company's debt levels have changed over a period of time. A decreasing leverage implies the company is reducing its debt relative to its equity, which generally indicates a healthier financial position.

Historical leverage of Snap-on (SNA)

In the case of Snap-on (SNA), the leverage has decreased from 0.1762 in 2022 to 0.1642 in 2023, an improvement in financial stability. Over the past 20 years, Snap-on has shown fluctuations but generally managed to maintain and reduce its leverage, reflecting prudence in debt management. Hence, according to Piotroski's criteria, Snap-on scores 1 on this front, indicating a positive trend towards fiscal responsibility.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. An increasing ratio indicates stronger liquidity and financial health.

Historical Current Ratio of Snap-on (SNA)

Snap-on's Current Ratio increased from 3.4674 in 2022 to 3.8785 in 2023, earning it 1 point in the Piotroski Analysis. This is a strong indicator of improved liquidity and prudent financial management. Over the last 20 years, Snap-on has continuously maintained a higher current ratio than the industry median, showcasing its superior financial positioning. For example, the industry median in 2023 was 2.456, significantly lower than Snap-on’s ratio. High current ratios have generally ranged between 1.776 and 3.8785 for Snap-on, consistently staying above the industry median, which ranged from 1.9519 to 2.456 during the same period. This trend underlines the company's focused efforts in maintaining ample liquidity to meet its short-term obligations.

Number of shares not diluted?

The change in shares outstanding is a measure used to assess whether a company is diluting its shareholders' equity. A decrease in outstanding shares often signals share buybacks, which can be a positive sign for existing shareholders.

Historical outstanding shares of Snap-on (SNA)

For Snap-on (SNA), the outstanding shares have decreased from 53,200,000 in 2022 to 52,900,000 in 2023, thus showing a reduction of 300,000 shares. This decrease means that there are fewer shares available in the market, indicating that Snap-on may be engaging in share buybacks. Historically, over the last 20 years, the number of outstanding shares has shown a general decline, especially from 2015 onwards, where shares outstanding dropped from 59,100,000 to the current 52,900,000. This trend is typically considered positive as it means existing shareholders own a larger portion of the company. Therefore, for this criterion, we add 1 point, reflecting a favorable outcome.

Operating of Snap-on (SNA)

Cross Margin is growing?

Change in Gross Margin compares the Gross Margin ratio between two periods to identify profitability trends. An increased gross margin indicates the company is managing its production costs effectively and generating more revenue from sales.

Historical gross margin of Snap-on (SNA)

The Gross Margin for Snap-on (SNA) increased from 0.5053 in 2022 to 0.5128 in 2023, showing a positive trend in profitability. This increase signifies the company's efficiency in cost management and revenue generation. With a consistent rise over the past two decades, from 0.432 in 2003, Snap-on's gross margin has been outperforming the industry median, which was 0.322 in 2023. This points to superior operational performance and a sustained competitive advantage in the market. Thus, Snap-on earns 1 point for this criterion.

Asset Turnover Ratio is growing?

The Asset Turnover criterion evaluates how efficiently a company uses its assets to generate sales. A higher ratio indicates better performance.

Historical asset turnover ratio of Snap-on (SNA)

The Asset Turnover for Snap-on (SNA) has decreased slightly from 0.7053 in 2022 to 0.7037 in 2023. This increment is marginal, dropping Snap-on's score for this criterion to 0 points. Over the last two decades, the ratio shows a progressive decline from 1.0808 in 2003 to its current levels, which brings concern to efficiency in asset utilization. This trend signals the need for strategic measures to enhance operational efficiency to recapture past levels.


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