SWK 88.22 (+0.54%)
US8545021011Industrial ProductsTools & Accessories

Last update on 2024-06-06

Stanley Black & Decker (SWK) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Stanley Black & Decker (SWK) - 2023 Piotroski F-Score analysis reveals a 3/9 rating based on criteria like profitability, liquidity, and asset 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: 3

We're running Stanley Black & Decker (SWK) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
0
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?
0
Number of shares not diluted?
0
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

We analyzed Stanley Black & Decker (SWK) using the Piotroski F-Score system, which assesses a company's financial strength based on profitability, liquidity, and operating efficiency. SWK's current score is 3 out of 9. While the company has a positive cash flow and operating cash flow higher than its net income highlighting operational resilience, it struggled with profitability this year having a negative net income. There is also a decrease in return on assets and gross margin signifying efficiency issues, and an increased leverage suggesting higher risk. Liquidity metrics such as the current ratio also showed a slight deterioration.

Insights for Value Investors Seeking Stable Income

Given Stanley Black & Decker's current Piotroski F-Score of 3, there are causes for concern in terms of profitability and efficiency. The company's positive operational cash flow and an uptick in asset turnover are positives but are overshadowed by significant challenges such as reduced profitability, increased leverage, and diluted shares. It's not typically considered a strong buy with this score, and more in-depth analysis is recommended. Potential investors should look deeper into the reasons behind these financial weaknesses before making any decisions.

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

Profitability of Stanley Black & Decker (SWK)

Company has a positive net income?

Net income is a key indicator of a company's profitability. Positive net income signifies profitability, while negative net income indicates a loss and can be a red flag for investors.

Historical Net Income of Stanley Black & Decker (SWK)

For Stanley Black & Decker (SWK), the net income in 2023 is -$310.5 million. This represents a decline into negative territory, signaling a net loss. Over the last 20 years, SWK has consistently generated positive net income, with highs like $1.69 billion in 2021. The abrupt drop to a negative value suggests underlying challenges or extraordinary costs that need further scrutiny. For Piotroski's analysis, this nets 0 points, indicating a poor performance in this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) represents the amount of cash generated by a company’s regular operating activities and is crucial for assessing financial health.

Historical Operating Cash Flow of Stanley Black & Decker (SWK)

For Stanley Black & Decker, the CFO in 2023 is $1,191,300,000 which is positive. Analyzing the past 20 years, CFO has shown consistent growth with few exceptions, such as a significant drop to -$1,459,500,000 in 2022. The positive cash flow in 2023 indicates a recovery and strengthens the company's financial position, thus earning 1 point for this criterion. Such trends are essential to evaluate as they reflect the company's ability to generate sufficient operational cash flow to sustain and grow the business.

Return on Assets (ROA) are growing?

Change in ROA measures how the company's efficiency in generating profits from its assets has shifted over a period. It’s crucial as a positive change indicates improving profitability and asset use efficiency.

Historical change in Return on Assets (ROA) of Stanley Black & Decker (SWK)

The Return on Assets (ROA) for Stanley Black & Decker (SWK) has decreased from 0.04 in 2022 to -0.0128 in 2023, marking a significant decline. This trend is concerning and indicates a reduction in the company's efficiency in generating profits from its assets. The industry median ROA has remained above 0.3 for the last 20 years, making SWK’s declining ROA trend starkly worse in comparison. Hence, according to this criterion, SWK would not score a point.

Operating Cashflow are higher than Netincome?

Understand the importance of comparing Operating Cash Flow (OCF) to Net Income (NI), particularly for Stanley Black & Decker (SWK).

Historical accruals of Stanley Black & Decker (SWK)

In 2023, Stanley Black & Decker reported an Operating Cash Flow (OCF) of $1,191 million compared to a Net Income (NI) of -$310.5 million. Since the OCF is higher than the NI, this meets the criterion and earns a score of 1. This novel finding suggests that despite a reported net loss, the company is generating positive cash flow from its operations. This discrepancy often implies that the company's earnings quality is high and that NI may be impacted by non-cash expenses or other temporary accounting adjustments. Historically, the OCF for SWK has fluctuated but remained generally positive, illustrating a strong capability to generate cash. This positive cash flow in 2023 amid net losses can be a signal of operational resilience, crucial for long-term stability and investor confidence.

Liquidity of Stanley Black & Decker (SWK)

Leverage is declining?

Leverage in financial terms refers to the amount of debt used by a company to finance its assets. It is a crucial metric to consider as higher leverage indicates higher risk due to the obligation to meet fixed interest commitments, but also potential for higher returns.

Historical leverage of Stanley Black & Decker (SWK)

Based on the provided data, Stanley Black & Decker's leverage increased from 0.2144 in 2022 to 0.2578 in 2023. This means the company took on more debt relative to its equity in 2023 compared to the previous year. Over the last 20 years, the leverage ratio has fluctuated, indicating varying levels of debt usage, but the increase in 2023 is notable. Given that increased leverage means higher risk, this trend is not favorable. Consequently, under the Piotroski analysis, Stanley Black & Decker would score 0 points for this criterion.

Current Ratio is growing?

The Current Ratio is calculated as Current Assets divided by Current Liabilities, indicating a company's ability to cover its short-term obligations with its short-term assets. It is important because it helps investors assess the liquidity position and short-term financial health of the company.

Historical Current Ratio of Stanley Black & Decker (SWK)

Comparing the Current Ratio of Stanley Black & Decker (SWK) from 1.214 in 2022 to 1.1928 in 2023, there is a marginal decrease. This implies that the company's ability to cover its short-term liabilities with its short-term assets slightly weakened over the last year. While a Current Ratio greater than 1 typically signifies the company is in good financial health, the fact that the ratio has decreased by approximately 1.75% (from 1.214 to 1.1928) over the past year suggests some deterioration in liquidity. Furthermore, historically over the last 20 years, SWK has had a relatively stable but generally lower Current Ratio compared with the industry median, which stood at 2.456 in 2023. This stresses SWK's liquidity challenges compared to its peers in the industry. Therefore, this criterion warrants a score of 0.

Number of shares not diluted?

Comparing the outstanding shares from 2022 to 2023 for Stanley Black & Decker is important because it indicates whether the company has engaged in actions like share buybacks or issuing new shares, which can affect shareholder value.

Historical outstanding shares of Stanley Black & Decker (SWK)

In 2022, the outstanding shares were 148,170,000, and in 2023, they increased to 149,751,000. Therefore, the outstanding shares increased by 1,581,000 over the year. This increase typically results in a score of 0 for this criterion, as it can indicate dilution, reducing the value of shares held by existing investors. Examining the historical data over the last 20 years, we observe several fluctuations in the number of outstanding shares. Notably, there was a sharp increase in 2009 with outstanding shares jumping to 150,167,000, later peaking in 2011 at 170,105,000, and thereafter gradually decreasing in most subsequent years until 2020. This trend suggests decisions impacting capital structure align with strategic corporate objectives, influencing long-term shareholder value.

Operating of Stanley Black & Decker (SWK)

Cross Margin is growing?

Change in Gross Margin assesses a company's pricing power, efficiency in production, and cost management. An increasing Gross Margin suggests that a company is improving its profitability by achieving higher revenue from sales relative to its cost of goods sold. It is a vital metric for evaluating a company's financial health and operational efficiency.

Historical gross margin of Stanley Black & Decker (SWK)

Comparing the Gross Margin of Stanley Black & Decker (SWK), which stood at 0.2492 in 2023 against 0.2528 in 2022, it shows a slight decrease. This trend, where the Gross Margin fell by 0.0036 or 36 basis points, indicates that the company faced higher costs or reduced pricing power, negatively impacting profitability. Over the last 20 years, for instance, the company's peak Gross Margin was 0.4036 in 2009, which highlights a significant long-term decline. When compared to the industry median, which was 0.322 in 2023, SWK's gross margin showcases underperformance. Therefore, Stanley Black & Decker does not earn a point for this criterion due to the decrease in its Gross Margin.

Asset Turnover Ratio is growing?

Asset Turnover evaluates a company's effectiveness in utilizing its assets to generate sales. A higher value is generally favorable.

Historical asset turnover ratio of Stanley Black & Decker (SWK)

Stanley Black & Decker's Asset Turnover increased from 0.6378 in 2022 to 0.6491 in 2023. This is a positive trend, indicating improved asset utilization efficiency. Historical data shows a downward trend from 2003, with fluctuations, reaching its lowest point in recent years (0.5913 in 2020). The uptick in 2023 signals potential recovery or strategic improvements, contributing positively to the overall Piotroski F-Score with an additional 1 point.


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.