STE 227.64 (+3.24%)
IE00BFY8C754Medical Devices & InstrumentsMedical Instruments & Supplies

Last update on 2024-06-05

Steris (STE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Analysis of Steris (STE) Piotroski F-Score for 2023: Steris scores 4/9, indicating a mixed financial position with strengths in profitability and liquidity but challenges in 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: 4

We're running Steris (STE) 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?
1
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

Steris (STE) is analyzed based on the Piotroski F-Score, which considers profitability, liquidity, and operating efficiency criteria. The company earns a score of 4 out of 9. Steris shows positive net income and strong cash flow from operations, indicating good profitability and operating efficiency. The company also has a high current ratio, suggesting strong liquidity. However, Steris has issues with declining return on assets (ROA), increased leverage, increased shares outstanding, shrinking gross margin, and decreased asset turnover ratio.

Insights for Value Investors Seeking Stable Income

With a Piotroski score of 4, Steris demonstrates moderate financial health. While the company has strong cash flow and liquidity, its declining efficiency and rising leverage are concerns. This stock may interest investors looking for companies with solid cash flow, but its operational inefficiencies and financial risk suggest caution. Investigating Steris further is recommended to understand the reasons behind the declining ROA, leverage increase, and other inefficiencies.

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

Profitability of Steris (STE)

Company has a positive net income?

The Piotroski criterion for Net Income checks if the net income for the current year is positive, as consistent profit generation is a sign of financial health.

Historical Net Income of Steris (STE)

The net income for Steris (STE) in 2023 is $107.03 million, which is positive. Therefore, Steris earns 1 point for this criterion. Reviewing Steris's net income over the last 20 years, we observe a generally positive trend with the exception of a few fluctuations. The peaks in 2019 and 2020, with net incomes of $303.72 million and $407.66 million respectively, reflect robust profitability. Despite the dip to $107.03 million in 2023, the positive net income remains a healthy indicator. Thus, Steris undoubtedly shows a good overall profit trend.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the amount of cash generated by a company’s regular business operations. It is essential to evaluate a company’s ability to generate cash flow from its core activities to sustain and grow its operations.

Historical Operating Cash Flow of Steris (STE)

For Steris (STE), the CFO of $756,947,000 in 2023 is positive, which adds 1 point in the Piotroski analysis. Historically, the CFO trend over the last 20 years shows consistent growth from $133,291,000 in 2003 to $756,947,000 in 2023. This remarkable growth is a potent indicator of Steris' robust operational efficiency and capability to generate substantial cash from its core business activities, underlining a positive trend in this criterion.

Return on Assets (ROA) are growing?

Change in ROA evaluates whether a company's return on assets has improved over the previous year. An increase signals improved efficiency in generating profit from assets.

Historical change in Return on Assets (ROA) of Steris (STE)

The Return on Assets (ROA) for Steris (STE) decreased from 0.0271 in 2022 to 0.0096 in 2023. This represents a significant drop. Therefore, no point can be added for this criterion. Over the last 20 years, it is worth noting that Steris has had fluctuating ROA values, with the industry median ROA consistently higher, hovering around the 0.5 mark in recent years. Steris has not matched industry median levels, and the downward trend in 2023 highlights inefficiencies that must be addressed to stay competitive. This drastic fall in ROA is not a good trend for the company and raises concerns about its asset utilization capability.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income criterion is evaluated by comparing the company's operating cash flow to its net income. This measure checks if the company generates sufficient cash from its operations to cover its net profit, indicating quality of earnings and financial health.

Historical accruals of Steris (STE)

In 2023, Steris (STE) reported an operating cash flow of $756.947 million and a net income of $107.03 million. Since operating cash flow is significantly higher than net income, the company earns a score of 1 for this financial criterion. This trend is favorable and suggests that Steris has strong cash-generating capabilities, further supported by a historical upward trend in operating cash flow over the past 20 years. Such performance indicates efficient operations and sound financial health. Changes over the years show a consistent rise in cash flow from operations since 2003, where it was $133.291 million. Net income over the same period had notable highs and lows, especially a recent low in 2023 following a larger drop in 2022. However, the operating cash flow remained robust, highlighting resilience and effective cash management.

Liquidity of Steris (STE)

Leverage is declining?

This criterion assesses changes in a company's leverage—specifically, its debt-to-equity ratio—from one year to the next to determine financial risk.

Historical leverage of Steris (STE)

For Steris (STE), the leverage has increased from 0.2714 in 2022 to 0.2918 in 2023. This increment indicates that the company is taking on more debt relative to its equity, which is typically seen as a negative development. Over the past 20 years, Steris' leverage ratio has fluctuated, starting from 0.0667 in 2003 and peaking at 0.3002 in 2017. The leveraged ratio of 0.2918 in 2023 is among the highest levels the company has seen in recent years, suggesting increased financial risk. Hence, for this criterion, no point is awarded.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover short-term liabilities with short-term assets, highlighting liquidity.

Historical Current Ratio of Steris (STE)

Between 2022 and 2023, Steris saw its Current Ratio increase from 2.0375 to 2.3339. This improvement signifies enhanced liquidity and a stronger ability to cover short-term obligations. Notably, Steris' Current Ratio for 2023 stands quite close to the industry median of 2.3418, underscoring its competitive financial position. Historically, Steris has maintained a relatively consistent Current Ratio, often near or exceeding the industry median, further illustrating its solid fiscal management. Given this trend, with an increase from 2022 to 2023, Steris earns 1 point for this criterion.

Number of shares not diluted?

Change in Shares Outstanding measures whether a company has issued more shares over time or bought back shares. A reduction in outstanding shares suggests stock repurchases, often a positive indicator for investors because it entails smaller equity dilution, thereby increasing each share's value.

Historical outstanding shares of Steris (STE)

In 2022, Steris (STE) had 97,535,000 outstanding shares, which increased to 99,706,000 by 2023. This increase entails a 2.22% rise, setting this criterion's score to 0. Reviewing the trend over the past two decades, it's noted that the company has intermittently increased and decreased its shares. Earlier, the shares had seen a significant drop from 70.9 million in 2003 to a low of 58.8 million around 2013, followed by fluctuating increases to the present figure. Generally, issuing additional shares could reflect either a need for new capital or efforts to fund acquisitions, expansion, or debt settlement. This increasing trend in recent years may warrant further scrutiny into the company's capital strategies.

Operating of Steris (STE)

Cross Margin is growing?

Gross Margin reflects the core profitability of the company's production. An increase indicates efficient cost management.

Historical gross margin of Steris (STE)

In terms of gross margin, Steris's (STE) gross margin decreased slightly from 0.4459 in 2022 to 0.4366 in 2023. Thus, no point is awarded here (0 points). Examining the 20-year trend, while Steris has consistently maintained a gross margin close to the industry median, with slight fluctuations, the company historically has demonstrated a reasonable ability to manage production costs. In comparison, the median industry gross margin for 2023 stood at 0.5549, significantly higher than Steris’s gross margin which signals a divergence in operational efficiency compared to the wider industry. However, it's worth noting that Steris’s gross margin has hovered within a narrow band over these years, suggesting stable operational performance in managing direct costs, even though lacking improvements in the most recent year.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in using its assets to generate sales revenue, indicating operational efficiency.

Historical asset turnover ratio of Steris (STE)

In 2023, Steris (STE) reported an asset turnover of 0.4078, compared to 0.4693 in 2022. This decrease in asset turnover, from 0.4693 to 0.4078, suggests that the company's efficiency in utilizing its assets to generate revenue declined over the year. Looking at the long-term trend over the past 20 years, there has been a noticeable decline from much higher levels in the early 2000s. For instance, the asset turnover ratio was as high as 1.1196 in 2003 and steadily decreased over the years. Thus, the consistent downward trend indicates growing inefficiencies. For 2023, the decrease results in 0 points, signaling a negative impact on operational efficiency.


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