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Last update on 2024-06-06

T. Rowe Price Group (TROW) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

T. Rowe Price Group (TROW) achieves a 7/9 Piotroski F-Score in 2023, reflecting robust financial health via profitability, liquidity, and operating 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.
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Short Analysis - Piotroski Score: 7

We're running T. Rowe Price Group (TROW) 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?
0
Leverage is declining?
1
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
1

The Piotroski F-Score helps in assessing the financial strength of a company, with a score range from 0 to 9. A score of 9 signifies a very strong financial position. T. Rowe Price Group (TROW) scores 7 out of 9 on the Piotroski scale.\n\nUnder profitability criteria, TROW achieves high marks due to positive net income, growing Return on Assets (ROA), and a positive cash flow. However, it lacks in generating higher operating cash flow compared to net income.\n\nAs for liquidity and leverage, TROW scores well on the current ratio and non-dilution of shares. However, increased leverage this year is a concern. The operating efficiency shows mixed results with slight growth in Asset Turnover but a decline in Gross Margin.\n

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 7, T. Rowe Price Group (TROW) appears to be a relatively strong and promising investment candidate. The company demonstrates good profitability and liquidity, although some caution is warranted due to higher leverage and reduced Gross Margin. Overall, this stock is worth considering for investment, albeit with careful monitoring of its leverage and operational efficiency in the future.

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

Profitability of T. Rowe Price Group (TROW)

Company has a positive net income?

Net income refers to the total profit of a company after all expenses and taxes have been deducted. It is a critical indicator of profitability.

Historical Net Income of T. Rowe Price Group (TROW)

In 2023, T. Rowe Price Group (TROW) reported a net income of $1,788,700,000, which is a positive figure. Hence, it earns 1 point for this criterion in the Piotroski Analysis. Looking at the historical data over the last 20 years, the company has consistently reported positive net income, with notable increases year over year until a slight dip in 2021. This trend showcases the company's strong and stable profitability over an extended period, cementing its position as a reliable powerhouse in the financial sector. Overall, this is a good indicator of the company's financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company’s regular business operations and is crucial for assessing a company's financial health.

Historical Operating Cash Flow of T. Rowe Price Group (TROW)

In 2023, the CFO for T. Rowe Price Group (TROW) is reported at $1,219,100,000, which is positive. This is a favorable indicator, earning TROW 1 point under the Piotroski F-Score model. Over the past two decades, TROW's operating cash flow has generally shown an upward trend, barring a few anomalies such as in 2017 and 2018. The varying CFO numbers highlight the underlying strength and consistent operational efficiency of the company.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) to measure company's efficiency in generating profit relative to its assets.

Historical change in Return on Assets (ROA) of T. Rowe Price Group (TROW)

For 2023, T. Rowe Price Group's (TROW) Return on Assets (ROA) is 0.1495, up from 0.129 in 2022. This increase is a positive indicator of the company's improved usage of its assets to generate profits. The historical ROA data over the last 20 years highlights fluctuations, with the highest being 0.12332 in 2013 and the lowest 0.12191 in 2023. Comparatively, the industry median ROA shows higher efficiency, reaching its peak at 0.7382 in 2009. Conclusively, the TROW's 2023 ROA improvement scores 1 point in the Piotroski criterion.

Operating Cashflow are higher than Netincome?

The operating cash flow criterion checks whether a company generates more cash from operations than its net income. It is important as it indicates the company’s ability to convert income into actual cash, highlighting cash flow health.

Historical accruals of T. Rowe Price Group (TROW)

For 2023, T. Rowe Price Group reported an operating cash flow of $1.219 billion and a net income of $1.789 billion. Operating cash flow is lower than net income, resulting in 0 points for this criterion under Piotroski analysis. This negative trend might indicate issues in cash realisation from its earnings. However, this warrants a deeper dive, given the complexity of the company's cash flow dynamics. Cash flow from operations has fluctuated over the past 20 years, peaking at $3.452 billion in 2021. Monitoring these variations alongside the accrual rates, which have dropped significantly to 0.0993 in 2023, offers a broader perspective on the financial health.

Liquidity of T. Rowe Price Group (TROW)

Leverage is declining?

The change in leverage ratio, which is the ratio of a company’s total debt to its equity, indicates how much of the company’s capital comes from debt. This metric is crucial as excessive leverage can be risky.

Historical leverage of T. Rowe Price Group (TROW)

Based on the provided data, T. Rowe Price Group's leverage ratio increased from 0.0251 in 2022 to 0.0283 in 2023. Consequently, the leverage has increased in 2023, which in the context of Piotroski analysis, does not warrant a favorable point. The increasing leverage trend signifies a higher reliance on debt, which could be risky especially if earnings do not grow correspondingly. Over the past 20 years, it is notable that T. Rowe Price Group maintained very low levels of leverage, with significant increases only seen post-2019. This recent rise could be attributed to strategic borrowing, which requires careful scrutiny moving forward. Therefore, no point is awarded 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. An increasing Current Ratio could indicate improved liquidity and financial health.

Historical Current Ratio of T. Rowe Price Group (TROW)

From 2022 to 2023, T. Rowe Price Group's Current Ratio increased from 5.5319 to 6.0427. This increase, quantified by a 0.5108 rise, is favorable as it demonstrates enhanced liquidity. In comparison to the industry median, which sits considerably lower at 2.1006 for 2023, TROW maintains a much stronger short-term financial position, highlighting its superior ability to manage short-term obligations compared to its industry peers.

Number of shares not diluted?

This criterion evaluates whether the company has reduced its outstanding shares over the period. This is important because a decrease in outstanding shares usually indicates share repurchase, which could signal management's confidence in the company's prospects.

Historical outstanding shares of T. Rowe Price Group (TROW)

In 2023, T. Rowe Price Group (TROW) had outstanding shares of 224.1 million, compared to 226 million in 2022. This represents a reduction in outstanding shares. According to the Piotroski analysis, this decrease is seen as positive because it implies a share repurchase policy that usually indicates the management's confidence in the company's financial stability and future growth. Over the last 20 years, the trend shows an overall reduction in outstanding shares from 257 million in 2003 to 224.1 million in 2023, which is a favorable trend. Thus, TROW earns 1 point for this criterion.

Operating of T. Rowe Price Group (TROW)

Cross Margin is growing?

Gross Margin compares a company's gross profit to its revenue. It's a crucial metric to understand operational efficiency and profitability before accounting for overhead costs. An increasing gross margin generally indicates better cost control or higher pricing power.

Historical gross margin of T. Rowe Price Group (TROW)

From 2022 to 2023, T. Rowe Price Group (TROW) saw a decrease in Gross Margin from 0.5496 to 0.4963. This means the company has not improved its operational efficiency or pricing power over the period; on the contrary, it experienced a decline, warranting a score of 0. Comparing this data to the industry's median, which was consistently lower than TROW's Gross Margin until 2022, the drop is significant. Historically, TROW has an upswing pattern with some fluctuations. Still, the recent trend reflects a downward trajectory, which could convey rising costs or declining revenue quality within the competitive landscape. Thus, such a downward trend is concerning for investors.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company in using its assets to generate sales. An increasing ratio is a positive indicator.

Historical asset turnover ratio of T. Rowe Price Group (TROW)

The Asset Turnover for T. Rowe Price Group increased from 0.5373 in 2022 to 0.5401 in 2023. Though the increment seems marginal (approximately 0.5%), it signifies improved asset efficiency. Historically, the firm's Asset Turnover peaked at 0.7582 in 2012 and demonstrates some variability over the past two decades, highlighting both internal and external operational challenges. Nonetheless, this recent increase is a favorable indicator in terms of resource utilization.


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