STLD 131.57 (-0.86%)
US8581191009SteelSteel

Last update on 2024-06-07

Steel Dynamics (STLD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analysis of Steel Dynamics' financial performance using the Piotroski F-Score. 2023 Score: 5/9. Learn about profitability, liquidity, and operating 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: 5

We're running Steel Dynamics (STLD) 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?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

Steel Dynamics (STLD) has a Piotroski F-Score of 5, reflecting a moderate financial health status based on profitability, liquidity, and operating efficiency. The company demonstrates strong liquidity with a positive net income and cash flow from operations. The leverage ratio has declined, and the number of outstanding shares reduced, indicating good financial management. However, the company faces challenges in return on assets, gross margin, and asset turnover, showing declines in these areas, signaling operational concerns.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 5, Steel Dynamics (STLD) presents a balanced but cautious investment opportunity. While it shows strong liquidity and positive financial management, the declining trends in return on assets, gross margin, and asset turnover suggest the company is currently facing some operational challenges. Investors may want to investigate further, especially focusing on how the company plans to address these issues before making a final investment decision.

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

Profitability of Steel Dynamics (STLD)

Company has a positive net income?

Net income is the company's total earnings after all expenses and taxes have been deducted from total revenue. It is a key indicator of profitability.

Historical Net Income of Steel Dynamics (STLD)

Steel Dynamics (STLD) reported a net income of $2.45 billion in 2023, which is decidedly positive. Over the last 20 years, the company's net income has shown both periods of significant growth and some downturns, particularly in the years 2009 and 2015, where it reported losses. The latest figure remains strong, although it is a decline from the previous highs in 2021 and 2022 when net incomes were $3.21 billion and $3.86 billion, respectively. Therefore, Steel Dynamics earns 1 point for a positive net income in 2023. This trend indicates good profitability overall but also suggests some recent cyclical downturn.

Company has a positive cash flow?

Cash flow from operations (CFO) measures the cash generated by a company’s normal operating activities. It's important because it indicates whether a company can generate adequate cash flow to maintain its operations and grow without external financing.

Historical Operating Cash Flow of Steel Dynamics (STLD)

Steel Dynamics (STLD) reported a positive CFO of $3,519,928,000 in 2023. This positive trend affirms their ability to generate solid cash flow from operations, essential for sustaining business activities, paying dividends, and capital investment. Observing the historical CFO data, it's clear that STLD has consistently shown strong operational cash flows, highlighting sound financial health and robust operational efficiency. This metric scores 1 point under the Piotroski analysis for showing positive CFO, signifying strong financial standing. In comparison to the historical high of $4,460,403,000 in 2022, there's a dip, yet the figure in 2023 remains significantly strong.

Return on Assets (ROA) are growing?

The Change in Return on Assets (ROA) criterion measures the yearly improvement in asset utilization and profitability. A higher ROA indicates more efficient use of assets to generate earnings.

Historical change in Return on Assets (ROA) of Steel Dynamics (STLD)

In 2023, Steel Dynamics' (STLD) ROA was 0.1686 compared to 0.2894 in 2022, representing a decrease, and therefore no points are allocated under this criterion. This downward movement might raise concerns, despite Steel Dynamics still performing above the industry's median of 0.1995 for 2023. Over the last 20 years, the company's ROA has fluctuated, peaking in profitability for certain periods such as 2022. The trend reveals sensitivity to economic cycles, suggesting areas for strategic improvement.

Operating Cashflow are higher than Netincome?

Determining whether a company's operating cash flow (OCF) exceeds its net income is vital. A higher OCF compared to net income signifies good earnings quality and strong cash-generating ability.

Historical accruals of Steel Dynamics (STLD)

In 2023, Steel Dynamics reported an operating cash flow of $3.519 billion and a net income of $2.451 billion. Given that the OCF is higher than the net income, this criterion passes and earns a point. This difference suggests a robust earnings quality and strong ability to generate cash. Reviewing the past 20 years, Steel Dynamics' OCF has generally trended positively, hitting a significant peak in 2022 at $4.460 billion. Despite a slight dip in 2023, the consistently high OCF bolsters the company's financial stability and growth prospects, supported by the historical spikes in 2015 and 2018.

Liquidity of Steel Dynamics (STLD)

Leverage is declining?

The leverage criterion examines the change in debt levels. Lower leverage is generally safer as it implies less risk of default.

Historical leverage of Steel Dynamics (STLD)

In 2022, Steel Dynamics (STLD) had a leverage ratio of 0.2128, which decreased to 0.1751 in 2023. This reduction in leverage is a positive trend, indicating that the company has reduced its debt levels, thereby potentially decreasing its financial risk. This trend is supported by the historical data over the last 20 years, which show fluctuations but an overall downward trend in leverage, especially in more recent years. Hence, for this criterion, Steel Dynamics deserves 1 point.

Current Ratio is growing?

Compare the Current Ratio of 2.9104 in 2023 with the Current Ratio of 3.7583 in 2022 and discuss its importance.

Historical Current Ratio of Steel Dynamics (STLD)

The Current Ratio of Steel Dynamics (STLD) has decreased from 3.7583 in 2022 to 2.9104 in 2023. This reduction indicates a decline in the company's ability to cover its short-term liabilities with its short-term assets. Typically, a higher Current Ratio suggests better liquidity and financial health. Generally, a ratio above 1.5 is considered healthy in the steel industry. Over the last 20 years, STLD has mostly maintained a Current Ratio above the industry median. For instance, the median industry ratio in 2023 is 2.6748, which STLD surpasses even with the decrease. This means that despite the recent decline, STLD still holds a relatively strong liquidity position. Historical data shows fluctuation in STLD’s Current Ratio, peaking at 4.7412 in 2015 and hitting a trough of 1.761 in 2008, reflecting adaptive financial management responsive to market conditions. Thus, based on the available trends and comparative analysis with the industry median, the Current Ratio's decline in 2023 may not stem from immediate distress, but it warrants further observation for sustained liquidity.

Number of shares not diluted?

Evaluating changes in outstanding shares is crucial as it indicates either share buybacks, which can enhance shareholder value, or share dilution, which can have the opposite effect.

Historical outstanding shares of Steel Dynamics (STLD)

Steel Dynamics (STLD) has shown a decrease in outstanding shares from 183,393,000 in 2022 to 166,552,000 in 2023, thus earning one point. This trend is positive as it signifies a reduction by about 9.15% YoY. Over the past 20 years, STLD has generally maintained a strategy of aggressively reducing its outstanding shares, especially since 2008, when the share counts started decreasing steadily, moving from 194,586,000 in 2008 to 166,552,000 in 2023. This reduction strategy typically suggests enhanced shareholder value through share buybacks, which increases each share's inherent worth in a lower number of shares available.

Operating of Steel Dynamics (STLD)

Cross Margin is growing?

Gross Margin is a financial metric used to assess a company's financial health and business model by revealing the proportion of money left over from revenues after accounting for the cost of goods sold.

Historical gross margin of Steel Dynamics (STLD)

In 2023, Steel Dynamics (STLD) reported a Gross Margin of 0.2153, down from 0.2748 in 2022. This indicates that the Gross Margin decreased over the past year. As Gross Margin is considered an important profitability measure, a decline suggests that the company is not as efficient in managing its production costs relative to its revenues as it was the previous year. Historically, the company has experienced fluctuations in its Gross Margins, reaching as low as 0.0963 in 2015 and as high as 0.2913 in 2021. Compared to the industry median, STLD's Gross Margin in 2023 is slightly above the industry median of 0.1995 but has declined compared to its highs. Since Gross Margin decreased from 2022 to 2023, this gives STLD a score of 0 for this Piotroski criterion.

Asset Turnover Ratio is growing?

Asset turnover measures a company's efficiency in using its assets to generate sales and is calculated as revenue divided by total assets.

Historical asset turnover ratio of Steel Dynamics (STLD)

In comparing the asset turnover ratios, we note that Steel Dynamics (STLD) had an asset turnover of 1.668 in 2022, which decreased to 1.2932 in 2023. This decline suggests that the company has become less efficient in utilizing its assets to generate sales over the past year. This criterion results in a 0 score under the Piotroski F-Score model since a decrease in asset turnover does not indicate improved operational efficiency. Historically, the company's asset turnover fluctuated, with significant highs in 2008 (1.6536) and 2021 (1.6891). The latest drop to 1.2932 represents a return to levels seen in years such as 2013 and 2020, indicating room for potential future 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.