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Last update on 2024-06-05

Walmart (WMT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Explore Walmart's 2023 Piotroski F-Score, a comprehensive financial analysis of profitability, liquidity, and operational efficiency with a score of 5/9.

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: 5

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

The Piotroski F-Score is a rating system from 0 to 9 that determines the strength of a company's financial position based on profitability, liquidity, and leverage. Walmart has a Piotroski score of 5 out of 9, suggesting a mix of strengths and weaknesses in its financial health. Walmart benefits from a positive net income and cash flow from operations, with its operating cash flow also exceeding net income, which is favorable. However, return on assets has decreased, and both the leverage and current ratio indicate some financial risk. Share buybacks have positively impacted the company's share counts, and an improved asset turnover ratio highlights better utilization of assets. On the flip side, the gross margin has decreased, reflecting increased costs or reduced pricing power.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 5, Walmart shows mixed financial health with several positive indicators, such as strong cash flow and asset turnover. However, concerns around increasing leverage, declining ROA, and lower gross margin must be acknowledged. For potential investors, Walmart may still be worth considering due to its consistent profitability and operational efficiency. However, further evaluation to address areas of concern like leverage and profitability trends is recommended before making investment decisions.

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

Profitability of Walmart (WMT)

Company has a positive net income?

Net income, or the bottom line, represents the company's profit after all expenses have been deducted from revenues. Positive net income indicates profitability and is a key indicator of financial health.

Historical Net Income of Walmart (WMT)

For 2023, Walmart's net income stands at $11.68 billion, which is positive. This earns Walmart a point in the Piotroski score. Although the net income has decreased compared to prior years, such as 2019 ($13.51 billion) and 2020 ($13.67 billion), it is essential to consider that in the pandemic year of 2020, Walmart's net income spiked to $19.74 billion. Given these nuances, maintaining positive net income amidst shifting economic climates highlights Walmart's resilience.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects the amount of cash a company generates from its regular operating activities.

Historical Operating Cash Flow of Walmart (WMT)

In the financial year 2023, Walmart's Cash Flow from Operations (CFO) stood at $28.841 billion, which is positive. This is a favorable sign and earns Walmart 1 point under the Piotroski Analysis criteria. Historically, Walmart has consistently reported positive CFO over the last two decades, revealing robust cash generation capacity. For instance, despite fluctuations, the CFO peaked at $36.074 billion in 2021 and dipped to a low of $12.532 billion in 2003. The positive trend over time signifies Walmart’s efficiency in operations and its ability to generate sufficient cash flow to meet its obligations, invest in growth opportunities, and return capital to shareholders.

Return on Assets (ROA) are growing?

ROA measures the efficiency of a company in generating profits from its assets. An increase signals better management and utilization of assets, crucial for long-term sustainability and competitive advantage.

Historical change in Return on Assets (ROA) of Walmart (WMT)

In 2022, Walmart had an ROA of 0.055 or 5.5%, which declined to 0.0479 or 4.79% in 2023. This marks a reduction of approximately 12.9% year-over-year, which is a negative trend. A falling ROA indicates diminishing returns on assets, potentially due to over-investment, inefficiencies, or heightened competition. Despite Walmart’s stable operating cash flows, this downward shift necessitates corrective strategic actions to optimize asset utilization compared to the past and especially relative to industry standards which hover around a much higher median ROA in the 30% range over the years.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a favorable indicator because it suggests that the company is generating enough cash from its core operations to sustain itself, which is essential for long-term financial stability. It means the quality of earnings is high, as the company is converting its profits into cash flow effectively.

Historical accruals of Walmart (WMT)

In 2023, Walmart's Operating Cash Flow is $28,841,000,000 compared to its Net Income of $11,680,000,000. As the Operating Cash Flow exceeds the Net Income, Walmart receives a point for this criterion. This trend is good since it indicates strong cash generation ability. The historical data over the past 20 years also shows Walmart consistently achieving a healthy operating cash flow, often higher than the net income, reaffirming the company's robust operational cash-generating capabilities. This signifies a pattern of sustainable financial practice and a sound earnings quality.

Liquidity of Walmart (WMT)

Leverage is declining?

Change in Leverage: this criterion compares the current year's leverage to the previous year's leverage. Leverage reflects a company's debt levels and risk.

Historical leverage of Walmart (WMT)

Walmart (WMT) had a leverage of 0.2128 in 2022, which increased to 0.2151 in 2023. Over 20 years, Walmart's leverage has fluctuated but generally maintained low levels. However, the slight increase in 2023 suggests a marginally higher reliance on debt. This incremental rise indicates increased financial risk, which can be a negative indicator for investors seeking stable financing structures. Hence, no point is added for the Piotroski analysis under this criterion.

Current Ratio is growing?

The Current Ratio measures company's ability to pay short-term obligations or those due within one year. It's calculated by dividing current assets by current liabilities. A ratio under 1 indicates potential liquidity issues.

Historical Current Ratio of Walmart (WMT)

Walmart's Current Ratio has decreased from 0.9278 in 2022 to 0.8206 in 2023, thus not improving and suggesting possible declining liquidity. Over the last 20 years, Walmart's highest Current Ratio was 0.9695 in 2015, while the industry median has mostly stayed above 1. Even compared to an industry median of 1.2876 currently, Walmart's lower Current Ratio demonstrates a disadvantage. This trend is unfavorable for Walmart, particularly in refining its short-term financial stability.

Number of shares not diluted?

Outstanding shares represent the number of a company's stock that is currently held by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company's officers and insiders. This criterion assesses whether the company has repurchased shares, indicating optimism about the firm's valuation.

Historical outstanding shares of Walmart (WMT)

In its latest reporting year, 2023, Walmart showed a decrease in outstanding shares to 8,171,000,000 from 8,376,000,000 in 2022. This reduction in shares outstanding earns Walmart 1 point according to the Piotroski F-Score criteria. This trend is particularly positive as it indicates that Walmart is engaging in share buybacks, which suggests management's confidence in the company's performance and an intention to return value to shareholders. Notably, this decline follows a trend of fluctuating share counts, which rose sharply in 2021 to over 8 billion shares but have since trended downward. Such buyback activities could augment earnings per share (EPS), therefore benefiting shareholders.

Operating of Walmart (WMT)

Cross Margin is growing?

Gross Margin measures the percentage of revenue that exceeds the cost of goods sold (COGS). It's essential because it reflects the efficiency of a company in managing its production costs relative to revenues.

Historical gross margin of Walmart (WMT)

The Gross Margin for Walmart (WMT) in 2023 is 0.2414, down from 0.251 in 2022, indicating a decrease. This reduction suggests Walmart faced higher costs or lower pricing power, negatively impacting profitability. Over the last 20 years, Walmart's Gross Margin peaked at 0.2565 in 2017. Comparatively, the industry median for Gross Margin over two decades was consistently higher, stressing Walmart's tighter margins relative to peers.

Asset Turnover Ratio is growing?

Change in Asset Turnover measures how effectively a company is employing its assets to generate revenues, reflecting operational efficiency.

Historical asset turnover ratio of Walmart (WMT)

For Walmart (WMT), the Asset Turnover ratio increased from 2.3032 in 2022 to 2.505 in 2023. This represents an increase in operational efficiency, suggesting that Walmart has improved in using its assets to generate revenue. The increase in Asset Turnover is a positive sign and earns the company 1 point according to the Piotroski Score criterion. Over the last 20 years, the ratio has shown generally stable efficiency, with minor fluctuations. This recent improvement places Walmart at its highest Asset Turnover ratio compared to the last two decades. This reinforces Walmart's strong asset utilization in 2023.


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