TDG 1277.61 (+2.87%)
US8936411003Aerospace & DefenseAerospace & Defense

Last update on 2024-06-07

TransDigm Group (TDG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 9/9)

Comprehensive Piotroski F-Score analysis of TransDigm Group (TDG) for 2023, scoring a perfect 9/9. Discover the financial health and investment potential of TDG.

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: 9

We're running TransDigm Group (TDG) 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?
1
Operating Cashflow are higher than Netincome?
1
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
1

The Piotroski F-Score is used to assess the strength of a company's financial position, ranging from 0 to 9. TransDigm Group (TDG) has a perfect Piotroski Score of 9, indicating strong profitability, liquidity, and operating efficiency. The company has consistently shown positive net income and cash flow from operations. They also demonstrated a positive return on assets, strong operating cash flow, declining leverage, growing current ratio, reduced number of shares, growing gross margin, and improved asset turnover ratio. This performance suggests that TDG is a financially healthy and well-managed company.

Insights for Value Investors Seeking Stable Income

Given TransDigm Group's perfect Piotroski Score of 9 and several years of consistent financial growth, the stock appears to be a strong investment opportunity. It is recommended to look into this stock as a potential investor due to its proven profitability, efficient operations, strong liquidity, and positive long-term trends in various financial metrics.

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

Profitability of TransDigm Group (TDG)

Company has a positive net income?

The first criterion evaluates whether the company's net income is positive, adding 1 point if it is. This is crucial as consistent profitability indicates the company's ability to generate earnings and stay financially healthy.

Historical Net Income of TransDigm Group (TDG)

The net income of TransDigm Group (TDG) for 2023 is $1,298,000,000. This figure is positive, thereby scoring 1 point in the Piotroski Analysis. Looking at the net income trend over the last 20 years, one can observe a significant and consistent upwards trend from a negative $75,728,000 in 2003 to the current positive figure. Such steady growth in net income not only reflects profitability but also suggests robust financial strategies and effective operational execution. Starting from turning positive in 2004, each subsequent year has shown strength in earnings, peaking notably in 2023. This historical view reinforces confidence in the company’s ability to maintain and grow its profit margins.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the company's ability to generate cash from its core business operations. Positive CFO is crucial for financial stability and growth.

Historical Operating Cash Flow of TransDigm Group (TDG)

TransDigm Group (TDG) has a Cash Flow from Operations (CFO) of $1,375,000,000 in 2023, which is positive. This trend is not only favorable this year but also historically positive, as demonstrated by the operating cash flow for the last 20 years, which fluctuates but generally shows an upward trend, peaking in 2023. With consistently increasing CFO over the years, TDG proves robust operational efficiency, marking this criterion as a success (1 point).

Return on Assets (ROA) are growing?

Change in ROA is a measure showing the efficiency of a company's use of its assets to generate earnings year over year. It is crucial as it signals improvements or declines in operational performance.

Historical change in Return on Assets (ROA) of TransDigm Group (TDG)

TransDigm Group (TDG) has shown an improvement in its Return on Assets (ROA), climbing from 0.0463 in 2022 to 0.0682 in 2023. This positive increase signifies that the company has become more efficient in turning its assets into profits, thus earning a score of 1 on this criterion. While an increased ROA is a promising sign, TDG's ROA still remains notably below the industry median of 0.2526 for 2023. This divergence suggests there is room for operational and strategic improvements to meet or exceed industry standards.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income means the company is generating more cash than its accounting profits, which is a good sign of financial health and operational efficiency.

Historical accruals of TransDigm Group (TDG)

For the year 2023, TransDigm Group (TDG) has an operating cash flow of $1,375 million which is higher than its net income of $1,298 million. This scenario is positively acknowledged in the Piotroski analysis by adding 1 point. This implies that the company's cash flows are in a strong position, as it’s generating more cash than its net income, underpinning its earnings quality. A look at the historical data reveals a consistent trend where operating cash flow has been growing over the past two decades, with only a few exceptions like the years 2003, 2019, and 2020. This underscores confidence in TDG's financial health and operational efficiency. Therefore, it meets the criterion, adding a point to the Piotroski F-Score.

Liquidity of TransDigm Group (TDG)

Leverage is declining?

The change in leverage ratio compares the proportion of a company's assets financed by debt from one year to the next.

Historical leverage of TransDigm Group (TDG)

In 2022, TransDigm Group had a leverage ratio of 1.0697, which decreased to 0.968 in 2023. This decrease signals that the company is using less debt relative to its assets, generally considered a positive sign as it indicates improved creditworthiness and reduced financial risk. Over the last 20 years, the leverage ratio has displayed fluctuations, peaking at 1.1421 in 2017 and hitting a low of 0.4811 in 2005. While the leverage has decreased in 2023 compared to recent years, it's not the lowest it has been historically. Nevertheless, this trend is positive for investors concerned about financial stability.

Current Ratio is growing?

The Current Ratio, which measures a company's ability to pay short-term obligations with its current assets, is crucial for assessing liquidity.

Historical Current Ratio of TransDigm Group (TDG)

The Current Ratio for TransDigm Group has increased from 3.9614 in 2022 to 4.2673 in 2023. This improvement suggests that TransDigm has enhanced its liquidity position, making it better equipped to meet its short-term liabilities. Over the last 20 years, TransDigm's Current Ratio has fluctuated but generally stayed above the Industry Median, which stood at 2.1805 in 2023. This upward trend is favorable, indicating sound financial health and effective management of current assets and liabilities. Therefore, TransDigm scores 1 point for this criterion.

Number of shares not diluted?

A reduction in outstanding shares often indicates a company is buying back its own stock, which can be a positive signal for investors. It typically suggests that the company has a surplus of cash and believes its stock is undervalued.

Historical outstanding shares of TransDigm Group (TDG)

In 2023, TransDigm Group reduced its outstanding shares to 57,200,000 from 58,200,000 in 2022. This change indicates a buyback of shares which is a favorable sign, suggesting the company thinks its stock is undervalued or sees fewer opportunities for investment in growth. Adding 1 point as the Outstanding Shares decreased. Historically, looking at the last 20 years, the company has fluctuated but overall it has substantially increased its number of shares.

Operating of TransDigm Group (TDG)

Cross Margin is growing?

Change in Gross Margin compares current year's gross profit ratio to previous years, reflecting the growth in production efficiency and cost control.

Historical gross margin of TransDigm Group (TDG)

In 2023, TransDigm Group (TDG) exhibited a Gross Margin of 0.5834, compared to 0.5708 in 2022. This marks an improvement, setting the score for the criterion to 1. The company's Gross Margin indicates a strong upward trend, as it has continuously remained above the industry median gross margin (0.2484 in 2023), and has risen significantly over the past 20 years from 0.4539 in 2003. This is a positive indicator, showcasing TDG's robust operational efficiency and effective cost management.

Asset Turnover Ratio is growing?

Change in Asset Turnover reflects a company's efficiency in using its assets to generate sales. It is crucial as it demonstrates whether the company is optimizing its asset base to boost revenue.

Historical asset turnover ratio of TransDigm Group (TDG)

In 2023, TransDigm Group (TDG) reported an Asset Turnover of 0.3459, up from 0.2902 in 2022. This represents an increase in the Asset Turnover ratio, which signals a positive trend. Adding 1 point is justified given the efficiency improvement. Notably, a look at the historical data over the last 20 years shows fluctuation, reflecting economic cycles and operational adjustments. However, the recent increase builds on recovery from the low point in 2020, aligning with broader corporate strategies to optimize asset utilization and drive sales growth. Increased efficiency like this is favorable for investors.


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