WM 213.75 (+0.93%)
US94106L1098Waste ManagementWaste Management

Last update on 2024-06-07

Waste Management (WM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Analyze Waste Management (WM) using the Piotroski F-Score for 2023. Understand WM's financial health through its F-score criteria. Final Score: 6/9.

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: 6

We're running Waste Management (WM) 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?
0
Current Ratio is growing?
1
Number of shares not diluted?
1
Cross Margin is growing?
1
Asset Turnover Ratio is growing?
0

The Piotroski F-Score assesses the financial strength of a company using nine criteria: profitability, liquidity, and operating efficiency. Waste Management (WM) scored 6 out of 9, indicating a stable yet not exceptional financial condition. Profitability: Net income and cash flow are strong, but a slight decrease in Return on Assets (ROA) is noted. Liquidity: Current ratio has improved, but leverage has increased slightly, indicating more debt. Operating: Gross margin is growing, and share buybacks are enhancing shareholder value. However, Asset Turnover has declined, suggesting less efficiency in using assets to generate sales.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 6, Waste Management demonstrates solid financial health, particularly in profitability and shareholder value enhancement through share buybacks. The stable cash flow and net income trends are positive indicators. However, the slight increase in leverage and decline in Asset Turnover suggest areas of concern that merit further monitoring. Overall, Waste Management appears to be a dependable investment, but one should keep an eye on its debt levels and asset efficiency.

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

Profitability of Waste Management (WM)

Company has a positive net income?

Net income is a company's total earnings after all expenses are deducted from revenues. It's a key indicator of profitability.

Historical Net Income of Waste Management (WM)

The net income for Waste Management (WM) in 2023 stands at $2,304,000,000. This is a positive figure and reflects robust profitability. Over the past 20 years, WM's net income has generally exhibited an upward trajectory, despite fluctuations during certain years. From 2003, where the net income was $630,000,000, to 2023, the figure has nearly quadrupled, indicating substantial growth. Notably, the net income peak in the last five years underscores WM's stable financial health. Therefore, we add 1 point to the Piotroski score.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's normal business operations. Positive CFO is crucial as it indicates that the company is generating enough cash to maintain and grow its operations.

Historical Operating Cash Flow of Waste Management (WM)

Waste Management (WM) has a positive CFO of $4,719,000,000 in 2023. This is a good sign for the company's financial health, as it shows robust cash generation. Over the last 20 years, WM's CFO has been consistently improving from $1,926,000,000 in 2003 to the current figure. This trend highlights the company's effectiveness in managing its operations and generating cash, thereby securing a 1-point addition for this criterion.

Return on Assets (ROA) are growing?

This criterion measures the change in return on assets (ROA) from one year to the next.

Historical change in Return on Assets (ROA) of Waste Management (WM)

The ROA for Waste Management (WM) slightly decreased from 0.074 in 2022 to 0.0718 in 2023. This results in a loss of 1 point under the Piotroski criteria, indicating a less efficient usage of company assets. Analyzing a broader context, over the last 20 years, WM's ROA has seen fluctuations analogous to the industry's median, which was 0.3375 in 2023. Understanding this trend is critical for investors as it reflects the company's profitability relative to its total assets.

Operating Cashflow are higher than Netincome?

Operating cash flow higher than net income is a positive indicator as it suggests the company is generating sufficient cash from operations to cover net income.

Historical accruals of Waste Management (WM)

For the year 2023, the operating cash flow of Waste Management (WM) stood at $4,719,000,000, while the net income was $2,304,000,000. Since the operating cash flow is higher than the net income, it adds 1 point to the Piotroski Score for Waste Management (WM). This trend is positive, indicating strong cash generation capability. Furthermore, over the past twenty years, WM's operating cash flow has shown a general upward trend, rising from $1,926,000,000 in 2003 to $4,719,000,000 in 2023. In comparison, net income has also risen but at a slower pace, moving from $630,000,000 in 2003 to $2,304,000,000 in 2023. These trends underscore the company's robust operational efficiency and financial stability.

Liquidity of Waste Management (WM)

Leverage is declining?

Assessing changes in a company's leverage (the ratio of debt to equity) helps in evaluating the company's financial risk and stability.

Historical leverage of Waste Management (WM)

In 2022, Waste Management's leverage ratio was 0.4645, and it increased to 0.4843 in 2023. This indicates an increase in leverage, meaning the company has taken on more debt relative to its equity. A higher leverage ratio generally indicates a higher financial risk, as the company is more reliant on borrowed funds. This increase in leverage does not earn any additional points in Piotroski's F-Score analysis. Reflecting on the last 20 years, while the leverage has fluctuated, the recent trend towards higher leverage must be closely monitored, given its implications on financial stability.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term obligations or those due within one year. It is crucial for assessing liquidity.

Historical Current Ratio of Waste Management (WM)

In 2023, Waste Management's current ratio stood at 0.9001, an improvement from 0.8081 in 2022. This increase suggests a better short-term liquidity position. Despite this uptick, the company's ratio remains below the industry's median ratio of 0.949, indicating room for further enhancement. Over the past 20 years, WM’s current ratio has frequently underperformed the industry median. The trend reflects conservative liquidity management but also potential vulnerability during economic downturns. Given the 2023 increase, a point for the Piotroski F-score is warranted.

Number of shares not diluted?

This criterion involves examining the change in the number of a company's outstanding shares, which is crucial for evaluating shareholder value and potential dilution.

Historical outstanding shares of Waste Management (WM)

In 2023, Waste Management (WM) reported 404.9 million outstanding shares, a decrease from 412.8 million in 2022. This indicates a reduction in outstanding shares, resulting in 1 point for this criteria. Historically, WM has shown a declining trend in outstanding shares over the past 20 years, from 594.3 million in 2003 to 404.9 million in 2023. The continuous reduction enhances shareholder value and signals potential stock buybacks or reduced dilution, which is favorable for investors.

Operating of Waste Management (WM)

Cross Margin is growing?

Gross Margin compares the company's gross profit to its net sales and provides insights into the company's core profitability. A higher Gross Margin indicates better efficiency in producing goods or services.

Historical gross margin of Waste Management (WM)

WM's Gross Margin increased from 0.3759 in 2022 to 0.3828 in 2023, which is a positive sign and adds 1 point. Over the last 20 years, the company's Gross Margin has generally been on an upward trajectory. Notably, WM's Gross Margin has consistently outperformed the industry median, which was 0.3375 in 2023, underpinning WM's operational efficiency and competitive edge. This long-term growth is beneficial for continued investor confidence and indicates sound management practices optimized for profitability.

Asset Turnover Ratio is growing?

The change in Asset Turnover evaluates the efficiency with which a company uses its assets to generate sales.

Historical asset turnover ratio of Waste Management (WM)

Comparing the Asset Turnover of 0.6364 in 2023 with the Asset Turnover of 0.6516 in 2022, we find that Asset Turnover has decreased (from 0.6516 to 0.6364). Hence, according to this criterion, we will assign a score of 0. Over the last 20 years, Asset Turnover has shown considerable fluctuations, peaking at 0.6786 in 2017 and hitting a low of 0.5331 in 2020. The recent decrease from 2022 to 2023 indicates a less efficient use of assets in generating sales, which could be a point of concern for investors.


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