Last update on 2024-06-05

Stryker (SYK) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze Stryker (SYK) 2023 Piotroski F-Score: 7/9 for financial strength insights. Investors get overview on profitability and efficiency criteria.

Short Analysis - Piotroski Score: 7

We're running Stryker (SYK) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Stryker (SYK) has received a high Piotroski F-Score of 7 out of 9, based on their strong financials and operational metrics for 2023. The company has demonstrated excellent profitability with a positive net income of $3.165 billion and healthy operating cash flow of $3.711 billion. Return on Assets (ROA) has improved significantly, indicating better asset utilization. The operating cash flow surpassing net income points to strong earnings quality. Furthermore, a reduction in leverage reflects a prudent financial management approach, and an increase in Gross Margin suggests enhanced operational efficiency. However, there are some concerns to note. The current ratio has declined slightly, indicating a potential tightening of liquidity. Additionally, a slight increase in outstanding shares suggests some degree of share dilution. Despite these minor drawbacks, the overall financial health of Stryker remains robust, making it an attractive consideration for investors.

Insights for Value Investors Seeking Stable Income

Given Stryker's strong financial performance, as evident from a high Piotroski F-Score of 7, it is worth further investigation for potential investment. The positive financial indicators such as high profitability, strong cash flow, and good leverage management make it a compelling choice. However, potential investors should also keep an eye on the declining current ratio and increase in share dilution to ensure it aligns with their investment criteria. Overall, Stryker presents itself as a potentially strong and undervalued stock in the market.

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

Profitability of Stryker (SYK)

Company has a positive net income?

Analyze whether the net income for Stryker (SYK) in the year 2023 is positive or negative and indicate its significance by adding 1 point for positive income and 0 for negative income. This criterion helps in assessing the profitability of the company.

For the fiscal year 2023, Stryker (SYK) reported a net income of $3,165,000,000, which is unequivocally positive. As the net income is positive, we add 1 point according to the Piotroski F-Score criteria, affirming the company’s profitability for that period. Over the past 20 years, Stryker's net income has demonstrated a generally upward trend, experiencing significant growth from $453,500,000 in 2003 to $3,165,000,000 in 2023. This positive trend underscores a robust long-term profitability trajectory, supporting the positive assessment for 2023.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the amount of cash generated by a company's regular business activities during a certain period.

For 2023, Stryker (SYK) reports a positive CFO of $3.711 billion. This is evident when examining the historical CFO values over the past 20 years where the trend shows an incremental growth from $648.5 million in 2003. The upward trajectory of the operating cash flow underscores the company's consistent profitability and efficiency in core business operations, which is a robust indication of financial health and stability. Given the positive CFO, Stryker earns a point for this criterion, reinforcing confidence in its cash generation abilities.

Return on Assets (ROA) are growing?

The Piotroski F-Score uses the change in Return on Assets (ROA) as one of its nine criteria for evaluating a company's financial health and efficiency at generating profits from assets. An increase in ROA is indicative of improved profitability and efficient asset utilization.

Stryker's (SYK) ROA increased from 0.0659 in 2022 to 0.0824 in 2023. This represents an improvement in profitability and asset efficiency. Specifically, the 24.94% increase in ROA suggests better management and utilization of assets in generating earnings. This trend is positive and warrants an addition of 1 point in the Piotroski F-Score. Over the past 20 years, SYK's ROA has shown significant fluctuation, albeit with an overall upward trajectory. However, SYK's ROA is still well below the industry median of 0.6463 in 2023, indicating room for improvement relative to peers.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income: This criterion checks if the company's operative cash flow is greater than the net income. It assesses the quality of earnings.

For the year 2023, Stryker (SYK) reported an operating cash flow of $3.711 billion and a net income of $3.165 billion. Given that the operating cash flow is higher than the net income, this indicates strong earnings quality and is a positive trend. The accrual ratio for 2023 is 0.093, suggesting that a significant portion of earnings is not tied up in non-cash components. Historically, the company's operating cash flow and net income trends have shown a steady increase over the last two decades. Therefore, we add 1 point according to the Piotroski F-Score analyses.

Liquidity of Stryker (SYK)

Leverage is declining?

Change in leverage refers to changes in the firm's use of borrowed funds. Lower leverage implies less reliance on debt financing, reducing financial risk.

Analyzing Stryker's historical leverage values reveals that in 2023, the leverage dropped to 0.2731 from 0.3215 in 2022. This decline indicates a decrease in the company's reliance on external debt for financing its operations. Historically, Stryker's leverage ratio has fluctuated but showed a general increase over the last 20 years, peaking in 2020 before starting to decline. This recent decrease in leverage is generally viewed as a positive trend, mitigating financial risks and reflecting a more prudent financial management approach. Point allocation: 1.

Current Ratio is growing?

Current ratio measures a company's capacity to pay off its short-term liabilities with its short-term assets. It's essential to consider as it indicates the firm's liquidity and short-term financial health.

The current ratio for Stryker (SYK) has decreased from 1.6302 in 2022 to 1.5804 in 2023. This decline results in 0 points for the Piotroski analysis. Considering the long-term trend, Stryker's current ratio has been consistently lower compared to the industry median. Since 2003, Stryker's current ratio had its peak at 4.7548 in 2010, whereas the industry median ratio peaked at 4.5486 in 2021. The recent ratio of 1.5804 indicates a tightening liquidity position, falling short of the industry's median of 4.0615. Thus, the reduced current ratio in 2023 is concerning, as it implies that the company might face challenges in covering short-term obligations without securing additional funding.

Number of shares not diluted?

Change in Shares Outstanding measures how the number of shares issued by the company fluctuates over time. A decrease often indicates repurchase plans and financial strength, potentially signaling shareholder value creation.

The Outstanding Shares of Stryker (SYK) have increased from 378,200,000 in 2022 to 379,600,000 in 2023. This represents an increase in the number of shares, indicating a dilution. Over the last 20 years, the trend has shown multiple periods of both issuances and repurchases, suggesting active financial maneuvers. However, the increase in 2023 means this criterion scores 0, and might indicate recent capital-raising activities or possible share-based compensations.

Operating of Stryker (SYK)

Cross Margin is growing?

The first criterion evaluates the change in Gross Margin for Stryker (SYK) from one year to the next. A rising Gross Margin indicates an improvement in the efficiency of the company's production processes and/or pricing strategy, leading to higher profitability. This is crucial for investors as it may reflect the company's competitive advantage and operational effectiveness. In the Piotroski analysis, an increase adds 1 point, suggesting better financial health.

Comparing Stryker’s Gross Margin of 0.637 in 2023 with 0.6276 in 2022, we observe an increase. This upswing suggests that the company's efficiency and profitability have improved year-over-year. A higher gross margin, as seen here, signals that Stryker is either controlling its production costs more effectively or benefiting from an enhanced pricing strategy. Historically, Stryker has maintained a superior gross margin compared to the industry median, which is a favorable indicator of its market position and operational competence. Hence, for this criterion, we can confidently add 1 point, indicating an excellent performance in maintaining and enhancing profitability.

Asset Turnover Ratio is growing?

Asset Turnover Ratio measures the efficiency of a company in using its assets to generate sales. A higher ratio indicates better performance.

Stryker's Asset Turnover Ratio has experienced a slight improvement from 0.5159 in 2022 to 0.5338 in 2023. This increase in Asset Turnover is viewed positively as it represents enhanced efficiency in using its asset base to generate revenue. Over the past 20 years, Stryker's Asset Turnover has shown a general declining trend, peaking at 1.2136 in 2003 and reaching its lowest point at 0.445 in 2020. Nonetheless, the uptick from 0.5159 in 2022 to 0.5338 in 2023 earns the company 1 point in the Piotroski Analysis, indicating an improvement in asset utilization.