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Last update on 2024-06-05

VeriSign (VRSN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

VeriSign (VRSN), assessed with the Piotroski F-Score for 2023, scores 8/9 indicating strong financial health and potential for investment.

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: 8

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

The Piotroski F-Score assesses a company's financial health on a scale of 0 to 9 using 9 criteria related to profitability, liquidity, and operating efficiency. A higher score indicates a stronger financial position. VeriSign (VRSN) scored 8 out of 9 using this model, suggesting strong financial health. They showed positive net income ($817.6 million) and positive cash flow ($853.8 million) in 2023, with an improved Return on Assets (ROA) compared to last year. Their operating cash flow exceeded net income, indicating strong cash generation. They reduced leverage but had a decline in their current ratio, raising some short-term liquidity concerns. The number of outstanding shares decreased, which often signals confidence in the company's value. Their gross margin and asset turnover ratios both showed positive growth, highlighting operational efficiency.

Insights for Value Investors Seeking Stable Income

Based on VeriSign's Piotroski Score of 8, it appears to be a strong investment. The company has demonstrated solid profitability, efficient asset use, and good cash flow management. However, potential investors should be cautious of the declining current ratio, which indicates short-term liquidity issues. Overall, this stock seems worth further research, especially for those looking for strong, undervalued investments.

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

Profitability of VeriSign (VRSN)

Company has a positive net income?

Net income evaluates a company's profitability and is a single, paramount measure for financial health.

Historical Net Income of VeriSign (VRSN)

VeriSign demonstrates a net income of $817.6 million in 2023, which is notably positive. Over the last 20 years, the company's net income trajectory has its ups and downs. The most highlighted years are 2003 and 2008, indicating lapses with negative income marks, specifically -$259.9 million and -$374.69 million respectively, which likely were due to particular strategic decisions or economic conditions. However, since 2009 onwards, VeriSign has largely demonstrated profitability with only growth trends. With the consistent and ascending net income seen recent years, such as $814.88 million in 2020 and adequate growth afterwards, VeriSign's financial health in terms of profitability looks favorably robust. Therefore, a point is rightly awarded given the positive net income in 2023.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a key indicator of a company's ability to generate sufficient cash to maintain or grow its operations.

Historical Operating Cash Flow of VeriSign (VRSN)

For the year 2023, VeriSign (VRSN) reported a positive CFO of $853.8 million. Historically, over the past 20 years, VRSN has consistently generated positive operating cash flows, showcasing financial stability. This positive trend signals robust internal cash generation capabilities, marking a healthy financial state and effectively scoring 1 point under the Piotroski criterion.

Return on Assets (ROA) are growing?

Change in ROA: Compare the ROA of the current year with the previous year (0.4696 in 2023 vs 0.3625 in 2022). If the ROA increased, add 1 point, otherwise set it to 0.

Historical change in Return on Assets (ROA) of VeriSign (VRSN)

For the fiscal year 2023, VeriSign (VRSN) reported a Return on Assets (ROA) of 0.4696, a notable increase compared to the previous year's ROA of 0.3625 in 2022. This uptick in ROA suggests improved operational efficiency, making better use of its assets to generate earnings. Consequently, it earns a point for Riestroski criteria. In comparison to the industry median ROA, which stood at 0.715 in 2023, VeriSign's performance, albeit improving, still remains below the sector's typical margin. Historically, VeriSign's ROA fluctuated but never consistently matched the industry median. This recent growth, however, reflects positively on its financial health and could potentially close this gap if the trend continues.

Operating Cashflow are higher than Netincome?

The criterion evaluates if a company's operating cash flow exceeds its net income.

Historical accruals of VeriSign (VRSN)

In 2023, VeriSign's operating cash flow was $853.8 million, while net income was $817.6 million. Since the operating cash flow is higher, it adds 1 point. This indicates that VeriSign is generating adequate cash from its core operations, surpassing the accounting profits reported in the net income. Historically, this trend has often been observed for VeriSign, as their operating cash flows have frequently exceeded net income over the last 20 years. This trend is positive and reflects strong cash generation capabilities, despite some variability in the accruals metric.

Liquidity of VeriSign (VRSN)

Leverage is declining?

Leverage analyzes how much debt a company uses to finance its assets. Lower leverage indicates lower financial risk.

Historical leverage of VeriSign (VRSN)

VeriSign's leverage increased from 1.0324 in 2022 to 1.0248 in 2023, which is a positive sign as leverage decreased. Over the past 20 years, the maximum leverage was 1.0324 in 2022, signalling a peak in debt, and the leverage decreasing in 2023 shows a trend towards lower financial risk.

Current Ratio is growing?

Change in Current Ratio measures the liquidity and ability of a company to pay off short-term liabilities with short-term assets.

Historical Current Ratio of VeriSign (VRSN)

VeriSign's current ratio decreased from 0.93 in 2022 to 0.8316 in 2023. This decline indicates a reduced ability to cover short-term liabilities, thus not meeting the Piotroski criteria and receiving 0 points. Over the last 20 years, VeriSign's current ratio has fluctuated significantly, but the 2023 figure is notably below the industry median of 1.5348, further underscoring liquidity concerns.

Number of shares not diluted?

Change in shares outstanding points toward a company's capital management efficiency.

Historical outstanding shares of VeriSign (VRSN)

For VeriSign (VRSN), the outstanding shares decreased from 107.9 million in 2022 to 103.4 million in 2023. This trend results in 1 point being added according to the Piotroski F-score. This decrease shows that the company has engaged in share repurchases, reducing the number of shares in the market, which can be beneficial as it often signals management's confidence in the company’s value and can potentially enhance shareholder value. Over the last 20 years, the company's number of shares has consistently decreased, from 239.78 million in 2003 to 103.4 million in 2023, illustrating a long-term commitment to share buybacks. This trajectory reflects a positive trend in capital management aimed at sustainable shareholder value enhancement.

Operating of VeriSign (VRSN)

Cross Margin is growing?

Compare the Gross Margin of a company across different years to analyze the trend in profitability efficiency.

Historical gross margin of VeriSign (VRSN)

Analyzing VeriSign's gross margins, there is a notable increase from 0.8591 in 2022 to 0.8679 in 2023. This signifies an improvement in profitability efficiency, reflecting effective management of production costs. When we compare these figures, it’s crucial to acknowledge VeriSign's consistent upward trend over the past two decades, despite industry fluctuations. In contrast, the industry median has shown significant variability, emphasizing VeriSign’s robust operational strategy. Thus, this increasing gross margin secures a point for VeriSign under Piotroski’s criteria, showcasing commendable operational performance.

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. An increasing Asset Turnover ratio typically indicates better performance, with the firm generating more revenue per unit of asset.

Historical asset turnover ratio of VeriSign (VRSN)

In 2023, VeriSign's Asset Turnover was 0.8575 compared to 0.7667 in 2022, reflecting an increase. Over the past 20 years, VeriSign's Asset Turnover has seen ups and downs, but the recent trend is positive, with 2023 reaching the highest value in two decades. This consistent improvement in Asset Turnover hints at enhanced asset utilization and efficiency by VeriSign, aligning with a positive business performance. Therefore, VeriSign earns 1 point for this criterion.


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