Last update on 2024-06-07

Salzgitter (SZG.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Deep dive into Salzgitter's 2023 Piotroski F-Score analysis, revealing key financial insights and performance indicators with a final score of 5/9.

Short Analysis - Piotroski Score: 5

We're running Salzgitter (SZG.DE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

We assessed the Salzgitter (SZG.DE) using the Piotroski F-Score, which gauges financial health across profitability, liquidity, and efficiency criteria. The company scored 5 out of 9, indicating a mixed financial position. Positive aspects include a positive net income of €200.1 million, a strong operating cash flow of €892 million, and operating cash flow higher than net income. However, challenges were noted with declining Return on Assets (ROA), increasing leverage, a decreasing current ratio, a drop to 0 shares outstanding, a falling gross margin, and a lower asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Given the mixed indicators, it's essential to approach Salzgitter with caution. The company's positive cash flow and recovery in net income are promising, yet the declines in ROA, leverage, and asset efficiency present significant risks. The unusual drop to 0 shares outstanding also requires further investigation. It may be worth monitoring the company for improvements, but as an investor, consider these risks carefully before making a commitment.

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

Profitability of Salzgitter (SZG.DE)

Company has a positive net income?

Net income is a fundamental criterion in the Piotroski score, indicating whether a company is profitable or not.

In 2023, Salzgitter reported a net income of €200.1 million, which is positive. Based on the Piotroski criteria, this contributes 1 point to the score. Over the past 20 years, Salzgitter has had fluctuating results with significant losses in several periods, specifically in years like 2009 (-€386.9 million), 2019 (-€241.2 million), and 2020 (-€277.3 million). However, it's worth noting significant profitability peaks, such as in 2006 (€1.51 billion), 2018 (€273.7 million), and recently in 2021 (€1.08 billion). The return to a positive net income in 2023 is a good trend, indicative of recovery and business strength despite the volatility in past earnings.

Company has a positive cash flow?

This criterion examines whether the company generates enough cash from its core business operations, indicating its financial health and sustainability.

The Cash Flow from Operations (CFO) for Salzgitter in 2023 stands at €892 million, which is clearly a positive figure. This trend is favorable, as it signifies robust operational performance and efficient cash management. In the past 20 years, Salzgitter had notable ups and downs in its CFO, with significant positive cash flows especially in 2005 (€471.49 million), 2007 (€1.079 billion), and some difficult years such as 2009 (-€196.6 million). The positive CFO in 2023 demonstrates Salzgitter's ability to generate sufficient cash from its core activities, adding stability to its financial stance despite historical volatility.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures the difference in a company's ROA from one year to the next. It evaluates the company's efficiency in generating profit relative to its total assets.

Comparing the ROA of 0.0185 in 2023 with the ROA of 0.1013 in 2022 for Salzgitter (SZG.DE), we observe a decline. This decline is significant since a higher ROA typically indicates more efficient management in effectively utilizing assets to generate earnings. The industry median ROA for 2023 is 0.1995, indicating that Salzgitter underperformed relative to its peers, adding further concerns. This criterion, therefore, scores 0 points due to the decreased ROA, highlighting potential inefficiencies or adverse market conditions affecting profitability.

Operating Cashflow are higher than Netincome?

This criterion examines if a company's operating cash flow is higher than its net income. This is vital as it suggests the company is generating sufficient cash to sustain operations, indicating robust financial health.

In 2023, Salzgitter (SZG.DE) reported an operating cash flow of €892 million, significantly surpassing its net income of €200.1 million. This observation aligns well with the Piotroski Score criterion, earning the company 1 point in this regard. Over the past 20 years, it is notable that Salzgitter's operating cash flow has seen fluctuations, as low as -€196.6 million in 2011 and peaking at over €1 billion in 2007. Despite this volatility, the current figure is promising as it indicates strong cash generation capabilities. Additionally, positive accruals, though fluctuating between -0.0223 and 0.1284, suggest sensible revenue recognition and realistic earnings portrayal. Thus, with the operating cash flow considerably higher than net income in 2023, it signifies a favorable financial positioning for Salzgitter.

Liquidity of Salzgitter (SZG.DE)

Leverage is declining?

Change in leverage assesses if a company is reducing its debt levels. Lower leverage often indicates a stronger balance sheet.

The leverage ratio for Salzgitter increased from 0.0343 in 2023 compared to 0.0522 in 2022, which signifies a rise in leverage. This is considered a negative trend because a higher leverage ratio may suggest increased financial risk. Over the last 20 years, the leverage ratio has fluctuated where it had been zero until 2015 and has reached as high as 0.0902 in 2020. The increase in 2023 is aligned with previous high-leverage points. Considering Piotroski analysis, which rewards reduction in leverage to indicate improved financial health, Salzgitter's increasing leverage results in scoring 0 for this criterion.

Current Ratio is growing?

The current ratio measures a company's ability to cover its short-term liabilities with its short-term assets, providing insight into its liquidity and financial health.

Salzgitter's current ratio has decreased from 1.8579 in 2022 to 1.7898 in 2023. This slight decline suggests a marginal reduction in the company’s liquidity position, indicating that Salzgitter has slightly less ability to pay off its short-term obligations compared to the previous year. Given the current ratio metric in the Piotroski score, this decrease does not earn a point, resulting in a 0. Despite this decrease, the current ratio is still relatively close to the industry median of 2.6748 in 2023, implying a stable liquidity condition within the sector norms based on the historical context.

Number of shares not diluted?

Change in Shares Outstanding assesses if the company has issued or repurchased shares. A decrease in shares outstanding often indicates that the company is buying back its shares, which is seen as a positive signal for investors as it increases shareholder value.

In 2022, Salzgitter had outstanding shares of 54,087,300, but in 2023, this number dropped significantly to 0 shares. This drastic reduction might actually indicate corporate restructuring or reclassification rather than typical buyback activity. Over the last 20 years, the number of shares generally fluctuated, reaching its peak in 2005-2007 (~63M shares) and seeing a significant reduction in 2008 (55.7M shares). While generally, a decrease in the number of shares outstanding can be considered positive because it increases the ownership percentage for existing shareholders, this particular drop to 0 is unusual and might mask underlying issues. Therefore, instead of awarding 1 point for typical beneficial decrement, this scenario warrants further investigation into the reasons for this unprecedented drop to 0 shares.

Operating of Salzgitter (SZG.DE)

Cross Margin is growing?

This criterion assesses the year-over-year trend in gross margin, crucial for analyzing profit efficiency and cost management.

Comparing Salzgitter's gross margin in 2023 (0.3126) with that in 2022 (0.3317), it is evident that the company experienced a decrease. This reduction means that Salzgitter has not been as effective in cost management or sales efficiency as in the previous year, resulting in diminished profitability. Within a 20-year spectrum, Salzgitter has had historical fluctuations in gross margins, with peaks as high as 1.678 in 2006 and valleies like 0.2605 in 2012. This negative trend in 2023 also needs to be viewed in the context of industry performance, where the industry median gross margin has been lower but more stable. For instance, the industry's median was 0.2168 in 2022 compared to Salzgitter's 0.3317, highlighting that despite the current decline, Salzgitter's margin remains above industry median. Nonetheless, given the Piotroski criteria, a decline in gross margin does not earn a point, making this metric a negative mark for Salzgitter in this specific financial analysis for 2023.

Asset Turnover Ratio is growing?

Asset Turnover determines how efficiently a company uses its assets to generate sales. An increase typically indicates improved efficiency.

The Asset Turnover ratio for Salzgitter has decreased from 1.1755 in 2022 to 0.9989 in 2023. This decrease indicates that the company is less efficient in converting its assets into revenue compared to the previous year. By looking at the historical data, we observe fluctuations with highs around 1.5 in the mid-2000s and lows around 0.84 in 2020. Given this decreasing trend, we assign 0 points for this criterion, signaling a less favorable outcome for asset efficiency this year.