Last update on 2024-06-07

Welltower (WELL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Detailed Piotroski F-Score analysis of Welltower (WELL) in 2023, scoring 7/9. Evaluate profitability, liquidity, and operating efficiency indicators.

Short Analysis - Piotroski Score: 7

We're running Welltower (WELL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Welltower (WELL) has been analyzed using the Piotroski F-Score, which rates companies on nine criteria to assess their financial health across profitability, liquidity, and operational efficiency. The final Piotroski score for Welltower is 7 out of 9, which is relatively strong. - Profitability: Welltower is profitable, with a positive net income of $340,094,000 in 2023 and consistent positive cash flow over the last 20 years. The ROA showed a significant improvement, though it remains below the industry average. - Liquidity: The company's current ratio improved significantly, indicating good short-term financial health. However, leverage increased slightly and the number of shares outstanding rose, which signifies dilution. - Operating Efficiency: The company has stable gross margins which slightly improved this year, but the asset turnover decreased marginally.

Insights for Value Investors Seeking Stable Income

Welltower scores a 7 out of 9, suggesting strong financial health. The company's profitability and cash flow generation are particularly strong points. Despite the positive performance, investors should be cautious of the increased leverage and share dilution. Nevertheless, the overall strong Piotroski score makes Welltower a stock worth considering for potential investment. Reviewing the latest market trends and further detailed financial performance would be prudent steps before making a final decision.

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

Profitability of Welltower (WELL)

Company has a positive net income?

Net income is a crucial indicator of a company's profitability. A positive net income signifies that the company is generating more revenue than its expenses, taxes, and other costs, which is essential for assessing financial health.

For Welltower (WELL), the net income for 2023 is $340,094,000. This is a positive figure, and thus, according to the Piotroski criteria, adds 1 point. Observing the net income over the past 20 years, Welltower has mostly shown an increasing trend, except for a few periods with fluctuations. Notably, the company experienced its highest net income in 2016 with $1,232,432,000, displaying its growth potential. Positive net income, especially one that is consistently growing over the years, underscores the company's ability to manage its expenditures efficiently while boosting its revenues. Therefore, setting the point to 1 for 2023 is justified.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash produced by a company's core operations, indicating operational efficiency and profitability. It's vital for assessing short-term liquidity.

For Welltower (WELL), the Cash Flow from Operations in 2023 stands at $1,601,861,000, which is positive. This is a robust indicator of the company's operational health. Historically, Welltower has demonstrated a consistent ability to generate positive CFO, as shown in the last 20 years' data. For instance, from $129,521,000 in 2003 to the current $1,601,861,000 in 2023, the company has markedly increased its cash-generating efficiency. This consistently positive trajectory indicates good financial health and assigns a point for the Piotroski criterion. This trend is advantageous for investors as it reflects Welltower's capability to reinvest in growth opportunities or meet its financial obligations without relying on external financing.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. A higher ROA indicates a more efficient company in using its assets to generate profit, which is crucial for investors seeking to understand a company's operational performance relative to its peers.

Welltower's ROA rose from 0.0039 in 2022 to 0.0083 in 2023, which translates to an increase of approximately 113%. This is a positive indicator, adding 1 point to Welltower in the Piotroski score. Over the last 20 years, Welltower has generally demonstrated steady operational cash flow, yet its ROA has been significantly below the industry median. Despite this year's improvement, Welltower's 2023 ROA of 0.0083 is still drastically lower than the industry median of 0.6985, indicating that while there's progress, there's still considerable room for improvement.

Operating Cashflow are higher than Netincome?

The criterion checks if the company is generating sufficient cash from its operations compared to its net income. A higher operating cash flow compared to net income suggests better earnings quality.

For the fiscal year 2023, Welltower (WELL) had an operating cash flow of $1,601,861,000, which is significantly higher than its net income of $340,094,000. This indicates a strong positive trend, as the company is generating substantially more cash than its accounting earnings. The consistency of Welltower's operational cash flows over the last 20 years further strengthens this position, indicating robust operational efficiency and earnings quality over an extended period. Thus, for this criterion, Welltower would earn 1 point.

Liquidity of Welltower (WELL)

Leverage is declining?

Leverage illustrates the degree to which a company is using debt to finance its operations and is crucial for understanding financial risk.

In 2022, Welltower's leverage ratio was 0.3949, which increased to 0.3662 in 2023, reflecting an upward trajectory. This implies the company's reliance on debt has lessened. Analyzing the historical leverage data over the last 20 years, it's discernible that the company experienced significant fluctuations, most notably in 2006 and 2007 with extreme leverage ratios above 16x—an anomaly compared to other years. Despite this volatile history, the recent trends of decreasing leverage from 0.4377 in 2020 to 0.3662 in 2023 suggest improved financial health, stability, and risk management. However, the Piotroski Criteria point for this metric is 0, since the ratio increased year over year from 2022 to 2023.

Current Ratio is growing?

This criterion evaluates the company's Current Ratio, which measures its ability to cover short-term liabilities with short-term assets. An increase indicates improved liquidity.

In 2023, Welltower's Current Ratio is 4.4485, compared to 2.6335 in 2022—a notable increase. This suggests a significant improvement in liquidity. When compared to the industry's median Current Ratio of 1.0418 for 2023, Welltower is substantially more liquid. Historical analysis reveals that the 2023 ratio is one of the highest for Welltower over the last 20 years, indicating robust short-term financial health. Hence, Welltower receives a full point for this criterion.

Number of shares not diluted?

This criterion looks at the change in the number of outstanding shares. A decrease indicates a positive sign as it reflects share buybacks, which often provide existing shareholders more value.

Upon examining the reported figures, Welltower (WELL) experienced an increase in outstanding shares from 462,185,000 in 2022 to 515,629,000 in 2023. This uptick points to a dilutionary event, which typically is not in favor of existing shareholders as it diminishes their share of ownership in the company. Over the past two decades, Welltower's number of outstanding shares has progressively risen. For instance, the company’s outstanding shares climbed from 44,201,000 in 2003 to 515,629,000 in 2023. Historically, this trend suggests a consistent need for the company to procure capital through equity issuances. In light of the Piotroski score, an increase in shares outstanding merits a deduction of a point, setting the score to 0 for this specific criterion. This signals a cautious stance for investors considering share dilution as a factor.

Operating of Welltower (WELL)

Cross Margin is growing?

The Change in Gross Margin criterion evaluates whether a company has improved its operational efficiency by comparing its current gross margin to the previous year's. An increase signifies better cost control or improved sales efficiency.

Welltower (WELL) has seen an increment in its Gross Margin from 0.3839 in 2022 to 0.3906 in 2023. This rise, albeit marginal, suggests a slight improvement in operational efficiency, possibly due to better cost management or enhanced revenue generation strategies. In the broader context of the last 20 years, Welltower's Gross Margin has been significantly below its highs, for instance, compared to a robust 0.9202 in 2008 and 0.8779 in 2010. Interestingly, the industry median Gross Margin also fluctuated over the same period, with a noticeable decline in the last few years, standing at 0.6985 in 2023. Despite this, Welltower's Gross Margin is still considerably lower than the industry median. Hence, while the slight increase in 2023 is a positive sign, Welltower needs to continually improve its cost efficiency to return to its historical highs and better align with industry standards. Therefore, for the Piotroski score, Welltower earns 1 point for this criterion due to the increase.

Asset Turnover Ratio is growing?

Asset Turnover is a key indicator of a company's efficiency in using its assets to generate revenue. It is calculated as sales divided by total assets.

When reviewing Welltower’s Asset Turnover, a slight decline is observed from 0.1587 in 2022 to 0.1582 in 2023. Hence, this would not add any points for improvement under the Piotroski model, and the score for this year remains zero in this category. Historically, WELL's Asset Turnover has shown significant variations, with notable highs in 2007 (3.4484) and lows in 2010 (0.086). The general trend over the last two decades shows a steady climb from the early years, peaking around 2019 (0.1607), before experiencing a slight dip to the current figures. This year’s minor decrease, although negligible, indicates a need for WELL to optimize its assets more effectively to boost revenue performance.