TER 153.13 (-0.86%)
US8807701029SemiconductorsSemiconductor Equipment & Materials

Last update on 2024-06-07

Teradyne (TER) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Comprehensive Piotroski F-Score analysis of Teradyne (TER) reveals a 5/9 score for 2023, highlighting the company's financial strengths and weaknesses.

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: 5

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

Teradyne's Piotroski F-Score analysis out of a possible 9 points scores a 5. The analysis is broken down into three sections: profitability, liquidity, and operating efficiency. Profitability: The company scores positively for net income and cash flow from operations, which have been generally strong and consistent. However, return on assets (ROA) decreased, leading to no points in that criteria. Importantly, operating cash flow exceed net income, further highlighting good earnings quality. Liquidity: Here, Teradyne saw mixed results, with an increase in its leverage (no points awarded for this category). However, the current ratio rose, indicating improved capacity to cover short-term liabilities and the number of outstanding shares declined, showing share buyback actions. Operating Efficiency: The gross margin has slightly declined but is still above the industry average. Yet, the company's asset turnover ratio has fallen, highlighting a recent drop in efficiency in utilizing assets to generate revenue.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-score of 5 out of 9, Teradyne (TER) demonstrates average financial health. It shows consistent profitability and solid management of operational cash flow, but there are concerning trends in declining return on assets and asset turnover ratio. That said, with a strong liquidity position and the potential for future profitability, Teradyne could be a candidate for further research. If you're an investor, this stock might be attractive if you believe the company can reverse its current asset efficiency downturns and maintain its liquidity improvements.

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

Profitability of Teradyne (TER)

Company has a positive net income?

Net income indicates a company's profitability. A positive value suggests that the company is making a profit, and this criterion adds 1 point if so.

Historical Net Income of Teradyne (TER)

For the year 2023, Teradyne's net income is $448,752,000 which is indeed positive. This is beneficial as it showcases profitability. Historically, the company has had fluctuations, with significant positive gains in recent years, particularly a high of over $1 billion in 2021. Adding 1 point for positive net income is justified.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects the amount of cash a company generates from its regular operating activities. A positive CFO indicates healthy cash inflows from core business activities.

Historical Operating Cash Flow of Teradyne (TER)

For Teradyne (TER), the CFO in 2023 stands at $585.23 million; this is positive. Consequently, TER scores 1 point for this criterion. Reviewing the historical data over the last two decades, Teradyne has consistently maintained positive CFO figures, notably peaking at $1.098 billion in 2021. This consistent trend demonstrates a strong ability to generate cash from core operations, which is a positive signal for investors, suggesting that the company is efficiently managing its operations and is fundamentally healthy.

Return on Assets (ROA) are growing?

This criterion assesses whether Teradyne's return on assets (ROA) has improved as compared to the previous year. ROA measures the efficiency of a company's management in earning profits from its assets.

Historical change in Return on Assets (ROA) of Teradyne (TER)

The ROA for Teradyne (TER) decreased from 0.1957 in 2022 to 0.1284 in 2023. This negative trend results in assigning 0 points for this criterion. A decreasing ROA suggests that the company's efficiency in utilizing its assets to generate earnings has deteriorated. Furthermore, when compared to the industry median ROA of 0.4718 in 2023, Teradyne's performance is notably lower, indicating a worrying trend relative to its peers. Over the last two decades, Teradyne's ROA fluctuated but has been typically lower than the industry median, averaging around 0.3729 whereas the industry median averaged about 0.4287. This persistent underperformance underscores a significant competitive disadvantage for Teradyne in asset utilization efficiency.

Operating Cashflow are higher than Netincome?

Criterion assesses whether operating cash flow exceeds net income, indicating strong earnings quality.

Historical accruals of Teradyne (TER)

In 2023, Teradyne reported an operating cash flow of $585.23 million, surpassing its net income of $448.75 million. This indicates a positive trend and adds 1 point in the Piotroski F-score. Historical data shows consistent operating cash flow generation, with the notable exception of 2008 when net income was negative. Overall, this metric underscores TER's robust cash flow management and suggests efficient earnings conversion, bolstering investor confidence.

Liquidity of Teradyne (TER)

Leverage is declining?

Change in leverage examines the difference in a company's Leverage ratio over a period, assessing its debt management. It's crucial as lower leverage often signifies less risk.

Historical leverage of Teradyne (TER)

The Leverage for Teradyne (TER) has increased from 0.0183 in 2022 to 0.0187 in 2023. This trend suggests a slight increment in leverage, translating to an increased amount of debt or decreased equity relative to assets. This rise of 0.0004, albeit marginal, indicates increased financial risk, but the company's leverage remains significantly lower compared to the past 20 years, especially confronting peaks in 2003 (0.2283) and 2017 (0.1277). Therefore, Teradyne does not earn a point for this criterion, resulting in a score of 0.

Current Ratio is growing?

Changes in Current Ratio: Evaluates a company's ability to cover short-term obligations with short-term assets, indicating liquidity health.

Historical Current Ratio of Teradyne (TER)

The Current Ratio for Teradyne (TER) has increased from 3.0256 in 2022 to 3.2761 in 2023, giving it 1 point in the Piotroski analysis. This increase is a positive indicator as it demonstrates an improved ability to cover short-term liabilities. Historically, from 2003 to 2023, Teradyne's Current Ratio shows a fluctuating trend with peaks, particularly in 2014 (4.2538) and 2017 (4.9969). Comparatively, the industry median current ratio has typically ranged between 2.5851 and 3.5318 over the same period. As of 2023, Teradyne's ratio of 3.2761 slightly underperforms the industry median of 3.161, reflecting a comparable if not slightly less favorable liquidity situation to its industry peers.

Number of shares not diluted?

Shares outstanding represent the total shares of stock that are currently owned by investors, including share blocks held by institutional investors and restricted shares owned by company insiders.

Historical outstanding shares of Teradyne (TER)

In 2022, Teradyne (TER) had 158,434,000 outstanding shares. This number decreased to 154,310,000 in 2023. The fact that outstanding shares decreased is a positive sign, showing the company may be involved in share buyback programs, thus one point is added to the Piotroski score for this criterion.

Operating of Teradyne (TER)

Cross Margin is growing?

Gross margin represents the percentage of total sales revenue that the company retains after incurring the direct costs associated with producing the goods and services it sells. This criterion is crucial as it indicates the efficiency of Teradyne's core business operations in generating profit, providing insight into its pricing strategy, production costs, and overall financial health.

Historical gross margin of Teradyne (TER)

In 2023, the gross margin of Teradyne stands at 0.5742, a slight decrease from the 0.5918 gross margin recorded in 2022. This decrease signifies a reduction in the efficiency with which Teradyne converts sales into actual profit. On a broader scale, this places Teradyne slightly below its historical peak in gross margin, previously achieved in 2021 at 0.5959. Analyzing the industry median gross margin, we see a rising trend, with the median at 0.4718 in 2023, compared to lower values in the past two decades, which indicates an overall improvement in industry-wide profitability and operational efficiency. Despite the slight downturn in Teradyne's gross margin, it remains well above the industry median gross margin of 0.4718, suggesting that the company continues to maintain a competitive edge within its sector. However, as the gross margin has indeed decreased compared to last year, according to the Piotroski F-Score, Teradyne would unfortunately score 0 points for this criterion. Historically, Teradyne's gross margin has shown substantial improvement from 2003 (0.2949) to its current levels, a testament to the company's strides in cost management and pricing effectively over the years. Yet, the recent decline prompts the need to closely monitor profitability trends moving forward, especially amid rising industry medians.

Asset Turnover Ratio is growing?

Explain the criterion for Teradyne (TER) and why it is important to consider

Historical asset turnover ratio of Teradyne (TER)

In 2023, Teradyne's asset turnover ratio stood at 0.766, a decline from 0.8631 in 2022. The year-over-year decrease suggests a reduction in the company's efficiency in using its assets to generate revenue. Therefore, for this Piotroski criterion, we assign 0 points. Reviewing a two-decade history of asset turnover ratios reveals that the company has seen fluctuations, peaking in certain years, such as 2010 and 2020, but shows a recurring inability to sustain high efficiency consistently.


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