VZ 41.46 (+1.64%)
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Last update on 2024-06-05

Verizon Communications (VZ) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Verizon Communications (VZ) rated with a Piotroski F-Score of 5 out of 9 in 2023, highlighting financial health through profitability, liquidity, and efficiency analysis.

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 Verizon Communications (VZ) 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?
1
Current Ratio is growing?
0
Number of shares not diluted?
0
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

Verizon Communications (VZ) was analyzed for its financial health using the Piotroski F-Score, which ranges from 0 to 9. Verizon scored a 5. The analysis covered three main areas: profitability, liquidity, and operating efficiency. For profitability, Verizon showed positive net income and a consistent positive cash flow, earning 2 points. However, its Return on Assets (ROA) declined, resulting in 0 points. For liquidity, Verizon's leverage increased, and its current ratio decreased, earning 0 points. The number of shares outstanding increased, also earning 0 points. For operating efficiency, Verizon's gross margin improved, earning 1 point, but its asset turnover ratio decreased, resulting in 0 points. Overall, the score indicates average financial health with both strengths and weaknesses.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score, Verizon Communications has an average financial health score of 5 out of 9. This indicates the company is in a moderate position. If you are a conservative investor, you may want to look for companies with higher scores, closer to 9, which indicates better financial health. However, if you're willing to take on some risk for potential upside, Verizon's consistent profitability and positive cash flow might be appealing. It's worth exploring Verizon further and considering other factors like industry position, growth prospects, and market conditions before making an investment decision.

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

Profitability of Verizon Communications (VZ)

Company has a positive net income?

Positive net income indicates profitability for Verizon Communications (VZ) and is critical for assessing financial health.

Historical Net Income of Verizon Communications (VZ)

Verizon Communications (VZ) has reported a net income of $11.614 billion in 2023, which represents a positive figure. This means the company has once again achieved profitability. Over the last 20 years, Verizon has displayed fluctuations in net income, with remarkable peaks in 2015 ($30.101 billion) and stable growth post-2019, despite minor downtrends. The current positive net income aligns with the general upward trajectory since 2019 and signals a continuity of financial resilience. Hence, this positively impacts the Piotroski score, earning it 1 point.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) reflects the amount of cash a company generates from its regular operating activities. It is crucial as it indicates whether a company can generate sufficient positive cash flow to maintain and grow its operations.

Historical Operating Cash Flow of Verizon Communications (VZ)

For Verizon Communications, the CFO in 2023 stands at $37.475 billion, which is positive. Adding to this, Verizon's CFO has shown a general upward trend over the past 20 years. Since 2003, where the CFO was $22.482 billion, it has mostly grown, peaking at $41.768 billion in 2020. Overall, this positive and mostly increasing trend underscores Verizon's robust operational efficiency and liquidity. Therefore, based on this criterion, one point is awarded to Verizon with a clear reflection of its stable cash-generative capabilities. This positive trend is essential as it signals sustained operational health, which is favorable for investors.

Return on Assets (ROA) are growing?

Return on Assets (ROA) evaluates how effectively a company uses its assets to generate profit. A higher ROA indicates more efficient asset utilization.

Historical change in Return on Assets (ROA) of Verizon Communications (VZ)

Verizon’s ROA decreased from 0.057 in 2022 to 0.0306 in 2023, resulting in a score of 0 for this criterion. This drop is concerning given that the industry median ROA has remained relatively stable, fluctuating slightly above 0.55 over the past two decades. A decreasing ROA could indicate inefficiencies in asset utilization or profitability challenges, which might warrant closer examination of Verizon’s operational strategies and financial health. Over the last 20 years, Verizon’s highest operating cash flow was $41,768,000,000 in 2020, yet its ROA does not parallel this trend consistently, reinforcing concerns.

Operating Cashflow are higher than Netincome?

This criterion assesses the company's ability to generate cash from its operations. A higher operating cash flow compared to net income suggests efficient operations and good cash management.

Historical accruals of Verizon Communications (VZ)

For Verizon Communications (VZ), the operating cash flow in 2023 is $37,475,000,000, which is significantly higher than its net income of $11,614,000,000. This results in meeting the criterion with a score of 1 point. The higher operating cash flow compared to net income is a positive indicator as it demonstrates strong operational efficiency and effective cash management. Over the last 20 years, Verizon has consistently shown a robust operating cash flow, with considerable peaks in years like 2019 ($41,768,000,000) and 2017 ($38,818,000,000). This favorable trend indicates that the company has been able to generate substantial cash flow relative to its net income, ensuring financial flexibility and the ability to reinvest in growth opportunities.

Liquidity of Verizon Communications (VZ)

Leverage is declining?

Change in Leverage compares the company's financial leverage between two periods. Decreased leverage generally indicates less reliance on debt for financing, signaling a stronger financial posture.

Historical leverage of Verizon Communications (VZ)

In 2023, Verizon Communications' leverage ratio was 0.4147, an upward trend from 0.4273 in 2022. This increase in leverage suggests Verizon has taken on more debt relative to its equity, a less favorable trend. Over the last 20 years, leverage ratios have varied, peaking in 2014 at 0.4759 while remaining relatively steady since 2015. This increase aligns with historic patterns but remains a negative indicator as higher leverage can expose the company to financial risk, particularly in uncertain economic climates. This would result in a Piotroski score of 0 for this criterion due to the increased leverage.

Current Ratio is growing?

Change in Current Ratio illustrates a company's ability to utilize its current assets to cover its short-term liabilities.

Historical Current Ratio of Verizon Communications (VZ)

Verizon Communications’ current ratio decreased from 0.7546 in 2022 to 0.6917 in 2023, resembling a decline in its ability to cover its short-term liabilities with its current assets. Historically, Verizon’s current ratio has exhibited inconsistency, peaking noticeably in 2013 at 2.6245 and fluctuating over the years. When compared to the industry median current ratio, Verizon's 2023 ratio of 0.6917 falls short of the industry median at 0.9574. This declining trend signifies a weakening short-term financial health, making this unfavorable for Verizon.

Number of shares not diluted?

Assessing changes in shares outstanding is vital as it affects earnings per share and the value of investors' equity.

Historical outstanding shares of Verizon Communications (VZ)

When examining Verizon Communications (VZ), the Outstanding Shares have increased from 4,202,000,000 shares in 2022 to 4,211,000,000 shares in 2023. Consequently, no point is added for this criterion. Such an increase, albeit slight, can dilute shareholder value as it implies potential dilution of earnings per share. To further enhance the understanding, it is notable that VZ's trend over the past 20 years has been toward increasing Outstanding Shares. This rise has primarily been consistent, indicating potential continuous issuance of shares. Analyzing specific years like 2014, where a significant jump occurred from around 2.87 billion in 2013 to over 3.98 billion in 2014, gives insight into possible strategic capital raising or mergers and acquisitions undertaken by Verizon.

Operating of Verizon Communications (VZ)

Cross Margin is growing?

The criterion evaluates if Verizon's gross margin improved year-on-year. An increase reflects better cost management or pricing power—crucial for profitability.

Historical gross margin of Verizon Communications (VZ)

In 2023, Verizon Communications (VZ) increased its Gross Margin to 0.5903 from 0.5679 in 2022. This means an increased efficiency in converting revenue into actual profit. A rise from 2022's 0.5679 to 2023’s 0.5903 indicates a positive trend, deserving a score of 1. The 2023 Gross Margin is also closer to pre-2019 levels, where the average margin hovered above 0.590, indicating strategic improvements. Notably, the Industry Median Gross Margin for 2023 is 0.6122, which means Verizon still lags behind its peers slightly; however, the upward trend positions it well for future advancements in cost efficiencies or pricing strategies.

Asset Turnover Ratio is growing?

The change in Asset Turnover measures the efficiency of the company in generating revenue from its assets, an increase indicates improved efficiency.

Historical asset turnover ratio of Verizon Communications (VZ)

The Asset Turnover for Verizon Communications has decreased from 0.3667 in 2022 to 0.3526 in 2023. Over the past 20 years, the company's Asset Turnover dipped consistently after 2013, resulting in lower efficiency in generating revenue from its assets. This trend is unfavorable. Therefore, for this criterion in the Piotroski F-Score, Verizon Communications scores 0 points.


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