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Last update on 2024-06-07

Ultra Clean Holdings (UCTT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Ultra Clean Holdings Piotroski F-Score trends for 2023 outlined. Evaluate the key financial health criteria and operational efficiency metrics now.

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: 4

We're running Ultra Clean Holdings (UCTT) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Criteria
Company has a positive net income?
0
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

Ultra Clean Holdings (UCTT) has received a Piotroski F-Score of 4, indicating some financial instability. Recent profitability metrics show negative net income and declining return on assets (ROA), pointing to operational inefficiencies. Despite these challenges, the company has shown a healthy cash flow from operations that surpasses net income, highlighting good operational health. Leverage has increased, raising financial risk, but the current ratio has shown slight improvement, indicating better liquidity. The number of shares has decreased, which is favorable. However, gross margin and asset turnover ratios are declining, reflecting poorer operational efficiency and competitiveness.

Insights for Value Investors Seeking Stable Income

Given Ultra Clean Holdings' Piotroski F-Score of 4 out of 9, the company's financial indicators present a mixed picture with significant concerns. The declining net income and ROA suggest operational challenges, while increasing leverage raises financial risk. However, the positive cash flow from operations and slight improvement in liquidity are good signs. If you're an investor who can handle some risk and believe in the company’s future plans to correct operational inefficiencies, UCTT might be worth a closer look. Otherwise, it might be safer to consider companies with a stronger financial position.

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

Profitability of Ultra Clean Holdings (UCTT)

Company has a positive net income?

Net income is a measure of a company's profitability and is considered positive if greater than zero and negative if less than zero.

Historical Net Income of Ultra Clean Holdings (UCTT)

In 2023, Ultra Clean Holdings (UCTT) reported a net income of -$31,100,000, indicating a negative net income for the year. Over the past 20 years, the company has seen significant fluctuations in net income, from highs like $119,500,000 in 2021 to lows such as -$52,417,000 in 2008. This inconsistency may be concerning for investors looking for stable profitability. Since the 2023 net income is negative, it scores 0 points on this criterion, underlining a challenging year for the company in terms of profitability.

Company has a positive cash flow?

Explain the criterion for Ultra Clean Holdings (UCTT) and why it is important to consider

Historical Operating Cash Flow of Ultra Clean Holdings (UCTT)

The Cash Flow from Operations (CFO) is a critical measure of a company's financial health. It represents the cash generated by the company's core business operations. For Ultra Clean Holdings (UCTT), a positive CFO of $135.9 million in 2023 is a favorable indicator.

Return on Assets (ROA) are growing?

Changes in ROA measure how efficiently management is employing its assets to capture a return on its investments. If the ROA declines year-over-year, it could suggest operational inefficiencies or detrimental impacts on profitability.

Historical change in Return on Assets (ROA) of Ultra Clean Holdings (UCTT)

For Ultra Clean Holdings (UCTT), the Return on Assets (ROA) declined from 0.0203 in 2022 to -0.0162 in 2023. This signals a downward trend in profitability and operational efficiency. Specifically, the company moved from generating a modest positive return on its assets to incurring a negative return, indicating that the assets are now being utilized less profitably than the prior year. This trend is concerning and suggests that Ultra Clean Holdings has been facing difficulties in maintaining operational efficiency or profitability over the past year. With a 2023 ROA much below the industry median of 0.4718, this highlights the growing gap between UCTT and its industry peers, emphasizing the critical need for management to address these declining returns.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income

Historical accruals of Ultra Clean Holdings (UCTT)

The comparison reveals that Ultra Clean Holdings (UCTT) had an operating cash flow of $135.9 million in 2023, which is significantly higher than its net income of -$31.1 million for the same year. This criterion shows a positive trend and warrants assigning a score of 1. The ability to generate operating cash flow exceeding net income is a favorable indicator, confirming the company's robustness in terms of core operations rather than accounting manipulations, which is essential for prospective investors and financial analysts. Analyzing the additional 20-year data, UCTT has experienced significant variability in both operating cash flow and net income throughout its history. Notable observations include high operating cash flows in recent years, especially in $211.6 million in 2021, contrasting with fluctuating net incomes, including prior years with losses such as $-52,417,000 in 2008 and $-31,100,000 in 2023. The consistency of positive operating cash flow despite net income volatility underscores the company's operational efficiency and effectiveness in converting sales into actual cash usable for business activities. This signifies long-term reliable financial health despite short-term accounting losses.

Liquidity of Ultra Clean Holdings (UCTT)

Leverage is declining?

Explain the criterion for Ultra Clean Holdings (UCTT) and why it is important to consider

Historical leverage of Ultra Clean Holdings (UCTT)

Leverage, typically measured as the ratio of total debt to total equity, is a vital indicator of a company's financial strategy and risk. In Ultra Clean Holdings' case, the leverage increased from 0.2924 in 2022 to 0.3235 in 2023, indicating that the company has taken on more debt relative to its equity. This trend suggests a higher financial risk, possibly to fund expansion or operational needs, but it also means increased interest obligations. Observing leverage helps investors assess the balance between risk and growth.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to cover its short-term liabilities with its short-term assets. It's important for assessing financial health.

Historical Current Ratio of Ultra Clean Holdings (UCTT)

Ultra Clean Holdings (UCTT) has demonstrated a marginal increase in its Current Ratio from 2.8232 in 2022 to 2.8813 in 2023. This small rise indicates that the company has slightly improved its capability to cover short-term obligations with short-term assets. Compared to the last 20-year trend, the ratio has often fluctuated, hitting a zenith of 4.4373 and a low of 1.9651. The industry median for 2023 stands at 3.161, implying UCTT's current ratio is slightly below the industry norm. Nonetheless, the positive trend in 2023 earns UCTT a point under Piotroski's F-Score. Overall, while the slight increase is positive, UCTT should aim for more substantial improvements to meet or exceed industry standards.

Number of shares not diluted?

Change in Shares Outstanding measures how the number of shares issued and held by investors varies over time and can indicate company buybacks or new issuance.

Historical outstanding shares of Ultra Clean Holdings (UCTT)

In 2022, Ultra Clean Holdings (UCTT) had 45,200,000 outstanding shares, while in 2023, the outstanding shares decreased slightly to 44,700,000. This reduction in shares outstanding is generally seen as a positive sign, suggesting that the company may be buying back its shares, which can be beneficial for shareholders as it often signals that the company's management believes the stock is undervalued and wants to increase equity return to existing shareholders. In this case, according to Piotroski’s criteria, UCTT would score 1 point, reflecting a favorable development. Historical data supports this trend; fluctuations in shares outstanding over the past 20 years reveal periods of both increase and occasional stabilization, culminating in a reduction in 2023 after a peak in 2022.

Operating of Ultra Clean Holdings (UCTT)

Cross Margin is growing?

Gross Margin is the ratio that measures how much of a company's revenue is left after paying for the cost of goods sold. It is crucial as it indicates the efficiency of a company in managing its production costs.

Historical gross margin of Ultra Clean Holdings (UCTT)

For Ultra Clean Holdings (UCTT), the Gross Margin decreased from 0.1958 in 2022 to 0.1599 in 2023, suggesting a decrease. Therefore, we set the score to 0. The provided data shows that UCTT's Gross Margin has often been significantly below the industry median, which was 0.4654 in 2022 and 0.4718 in 2023. This decline reflects poorly on the company's operational efficiency compared to industry standards.

Asset Turnover Ratio is growing?

Asset Turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue. It is important as it provides insight into operational efficiency.

Historical asset turnover ratio of Ultra Clean Holdings (UCTT)

From 2022 to 2023, Ultra Clean Holdings (UCTT) experienced a decrease in Asset Turnover, falling from 1.1912 to 0.9061. This indicates that the company is generating less revenue per dollar of assets compared to the previous year, which is a trend indicative of decreasing operational efficiency. Over the last 20 years, the Asset Turnover ratio has seen significant fluctuations, reaching a high of 3.126 in 2004 and trending downward to the current low.


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