WBA 11.73 (+0.26%)
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Last update on 2024-06-04

Walgreens Boots Alliance (WBA) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Detailed Piotroski F-Score analysis for Walgreens Boots Alliance (WBA) in 2023 shows a score of 4/9, with challenges in net income, ROA, and leverage.

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 Walgreens Boots Alliance (WBA) 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?
1
Current Ratio is growing?
0
Number of shares not diluted?
1
Cross Margin is growing?
0
Asset Turnover Ratio is growing?
0

Walgreens Boots Alliance (WBA) has received a Piotroski F-Score of 4, which indicates a weak financial health according to the 9-criteria scoring system. The company's performance shows negative points in areas such as profitability (negative net income for 2023), declining return on assets (ROA), increased leverage, reduced current ratio, falling gross margin, and decreasing asset turnover ratio. Positive aspects include its positive cash flow from operations, operating cash flow higher than net income, and a reduction in outstanding shares. However, these positive trends are overshadowed by significant negative indicators showing financial and operational troubles.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 4, it is recommended to approach Walgreens Boots Alliance (WBA) with caution. The score suggests it faces financial and operational challenges, which makes it a risky investment at this point. Potential investors might want to conduct a more in-depth analysis or look for alternative investments with stronger financial health and higher scores.

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

Profitability of Walgreens Boots Alliance (WBA)

Company has a positive net income?

The first criterion is to evaluate whether Walgreens Boots Alliance (WBA) has a positive net income for the year, aiming to ensure profitability.

Historical Net Income of Walgreens Boots Alliance (WBA)

For the fiscal year 2023, Walgreens Boots Alliance reported a net income of -$3.08 billion, indicating a negative net income. This performance for the current year results in a score of 0 for this criterion. Historically, the company has shown positive net incomes for most of the past 20 years with substantial peaks, such as $5.02 billion in 2018. However, the negative figure for 2023 reflects significant challenges that the company may need to address to return to its former profitability trends.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the amount of cash generated by a company's normal business operations. It's a key indicator of financial health and operational efficiency.

Historical Operating Cash Flow of Walgreens Boots Alliance (WBA)

Walgreens Boots Alliance (WBA) reported a cash flow from operations of $2.258 billion for 2023, which is a positive figure. This positive trend suggests that WBA is successfully generating enough cash from its core business activities to fund its operations, invest in growth opportunities, or reduce debt. Comparing this figure to historical data, however, indicates a substantial decline from previous years (e.g., $3.899 billion in 2022 and $8.265 billion in 2018). While the positive CFO is a good sign, the decreasing trend over the last several years warrants attention and further investigation into the underlying causes.

Return on Assets (ROA) are growing?

Change in ROA for Walgreens Boots Alliance (WBA): Comparing the ROA of -0.033 in 2023 with 0.0506 in 2022.

Historical change in Return on Assets (ROA) of Walgreens Boots Alliance (WBA)

The Return on Assets (ROA) for Walgreens Boots Alliance has fallen from 0.0506 in 2022 to -0.033 in 2023. This significant drop indicates a troubling trend and signifies that the company's assets have been less effective in generating income in the most recent year. In stark contrast, the industry median ROA is 0.2729 for 2023, showing that Walgreens has seriously underperformed compared to its peers. This underperformance can be partly attributed to operational inefficiencies or increased expenses. The historical data suggests that while Walgreens had periods of growth in operating cash flows, recent years are a cause for concern. Importantly, had Walgreens shown an increase in ROA, it would have added 1 point to the Piotroski Score, but the decline results in a score of 0 for this criterion.

Operating Cashflow are higher than Netincome?

The comparison of Operating Cash Flow (OCF) to Net Income assesses the quality of earnings by determining if cash flow is genuinely supporting reported profits.

Historical accruals of Walgreens Boots Alliance (WBA)

For Walgreens Boots Alliance (WBA), the Operating Cash Flow for 2023 stands at $2.258 billion, whereas the Net Income is -$3.08 billion. This indicates that WBA's OCF is substantially higher than its Net Income. This is positive as it suggests that the company's operations are generating genuine cash flow despite reporting a net loss. Bad accrual trends in historical data backs this interpretation, as it often indicates higher reliance on non-cash accounting adjustments in prior profitable years.

Liquidity of Walgreens Boots Alliance (WBA)

Leverage is declining?

Analyze changes in Leverage for Walgreens Boots Alliance (WBA) as it indicates the company’s debt levels and ability to meet financial obligations.

Historical leverage of Walgreens Boots Alliance (WBA)

The data indicates that Walgreens Boots Alliance’s (WBA) leverage increased from 0.3133 in 2023 compared to 0.3565 in 2022. This implies a higher proportion of debt relative to equity in the firm's capital structure. Over the last 20 years, while there has been significant fluctuation, the trend of increasing leverage suggests potential financial strain. Given the criterion to add 1 point if the leverage decreases, the score would be 0 in this scenario. Increased leverage can signal rising risks associated with debt servicing and solvency, posing potential concerns for investors.

Current Ratio is growing?

The current ratio is a liquidity metric that evaluates a company's ability to pay off its short-term liabilities with its short-term assets. A higher current ratio implies better liquidity.

Historical Current Ratio of Walgreens Boots Alliance (WBA)

From 2022 to 2023, Walgreens Boots Alliance's current ratio declined from 0.7484 to 0.6319, a decrease illustrating a negative trend in liquidity. This suggests that the company's ability to cover short-term liabilities has deteriorated. As a reference, the industry median current ratio for 2023 is 1.2028, which is substantially higher than WBA's figure, indicating that Walgreens is underperforming its peers in liquidity.

Number of shares not diluted?

The Change in Shares Outstanding measures how much a company's number of shares has increased or decreased over time, indicating whether existing shareholders have had their equity diluted.

Historical outstanding shares of Walgreens Boots Alliance (WBA)

From 2022 to 2023, Walgreens Boots Alliance (WBA)'s outstanding shares decreased from 864,400,000 to 863,200,000. This reduction suggests that the company either repurchased some of its shares or has not issued new shares, which is generally a positive sign for existing shareholders as it prevents equity dilution. Over the last 20 years, WBA has had fluctuating figures, hitting its peak number of shares outstanding in 2016 at 1,091,100,000 and gradually decreasing since then. The one-year decrease from 2022 to 2023 aligns with this longer-term trend of reducing outstanding shares, potentially signaling a focus on shareholder value. Thus, for this criteria, WBA earns 1 point.

Operating of Walgreens Boots Alliance (WBA)

Cross Margin is growing?

The criterion evaluates if the Gross Margin has improved compared to the previous year. An increasing Gross Margin suggests better cost control or higher profit margins from sales.

Historical gross margin of Walgreens Boots Alliance (WBA)

The Walgreens Boots Alliance (WBA) has experienced a decrease in Gross Margin from 0.213 in 2022 to 0.1946 in 2023. This decline reflects a reduction in the percentage of revenue remaining after accounting for the cost of goods sold. In context, this means WBA retained less revenue from its sales in 2023 compared to 2022. Over the last 20 years, WBA’s Gross Margin showed fluctuations but has generally trended downwards. For instance, Gross Margins were consistently above 0.27 from 2003 to 2012 and then began a steeper decline around 2013. Comparatively, the retail pharmacy's industry median Gross Margin also fluctuated but did not see as pronounced a drop. In 2023, the industry median Gross Margin was at 0.2729, significantly higher than WBA's 0.1946. Given this trend, it is important for investors to scrutinize whether WBA’s decreasing margin is due to rising costs, pricing pressures, or inefficient operational management. Therefore, the Gross Margin criterion for WBA in 2023 is given 0 points as the margin decreased.

Asset Turnover Ratio is growing?

A critical evaluator of operational efficiency, Asset Turnover gauges how effectively a firm utilizes its assets to generate revenue.

Historical asset turnover ratio of Walgreens Boots Alliance (WBA)

In 2023, Walgreens Boots Alliance (WBA) reported an Asset Turnover Ratio of 1.4895, a slight decrease from 1.5484 in 2022. This indicates a downtrend rather than an improvement, resulting in 0 points awarded for this criterion. Historical data corroborates a consistent decline over the past two decades, highlighting systemic efficiency challenges. Peak levels were observed in 2003 at 3.0543, steadily declining through the years, accentuating the need for strategic interventions to restore operational efficacy.


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