Last update on 2024-06-06

American Airlines Group (AAL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Discover the Piotroski F-Score analysis of American Airlines Group (AAL) for 2023, revealing a solid financial position with a final score of 7 out of 9.

Short Analysis - Piotroski Score: 7

We're running American Airlines Group (AAL) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score evaluates companies based on 9 criteria centered around profitability, liquidity, and operating efficiency. American Airlines Group (AAL) has a Piotroski F-Score of 7 out of 9, indicating a strong financial position overall. Key positive aspects include positive net income, cash flow from operations, growing return on assets, operating cash flow higher than net income, improving gross margin, and higher asset turnover ratio. However, the company faces issues with higher leverage, decreasing current ratio, and an increase in outstanding shares, reflecting potential financial risk and shareholder dilution.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, American Airlines Group (AAL) shows strong profitability and operational improvements but has some liquidity and leverage challenges. Thus, while AAL may be a good investment for those looking for growth and recovery stories, potential investors should be cautious of the risks associated with its financial stability and shareholder dilution. It's worth a deeper look for those considering an investment, but one should weigh these factors carefully.

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

Profitability of American Airlines Group (AAL)

Company has a positive net income?

In the Piotroski Score model, an increase in the Net Income is crucial as it indicates a company's profitability and financial health.

For the fiscal year 2023, American Airlines Group (AAL) reported a net income of $822 million, which is a positive figure. Consequently, AAL earns 1 point for this criterion. This is particularly significant when examined in the context of the last two decades, where the company has had a fluctuating financial journey. In the past 20 years, AAL has experienced years with significant losses, such as 2003 with a net loss of $1.23 billion and 2020 with a monumental net loss of $8.89 billion, highlighting the impact of external factors like economic downturns and the global pandemic. Therefore, the positive net income in 2023 is a favorable trend, representing strong financial recovery and resilience.

Company has a positive cash flow?

This criterion checks whether American Airlines Group (AAL) has a positive Cash Flow from Operations (CFO). CFO reflects the amount of cash generated by a company's regular business operations and is a crucial indicator of financial health.

The Cash Flow from Operations for American Airlines Group (AAL) in 2023 is $3.803 billion, which is positive. This merits a score of 1 point according to Piotroski's criterion. Observing the historical data, AAL has experienced considerable fluctuations in CFO over the past two decades, including significant negative cash flow in 2008 and 2020. However, the overall trend has shown improvement, especially notable robust years like 2015 ($6.249 billion) and 2016 ($6.524 billion). The 2023 figure concurs with an upward trend after a severe downturn in 2020.

Return on Assets (ROA) are growing?

Change in ROA evaluates whether a company's return on assets has improved year-over-year. ROA measures a company's effectiveness in using its assets to generate profit. An increase indicates better utilization of the company's assets.

For American Airlines Group (AAL), the ROA increased from 0.0019 in 2022 to 0.0129 in 2023 which reflects better efficiency in asset utilization. Comparatively, while the 2023 ROA is modest relative to the industry's median of 0.198, it still represents a positive trend. This criterion earns 1 Piotroski point.

Operating Cashflow are higher than Netincome?

This criterion examines if the company's operating cash flow exceeds its net income. It serves as a measure of earnings quality and indicates plausible earnings. This underscores the cash-focused sustainability of earnings rather than accounting profits.

For American Airlines Group (AAL) in 2023, the operating cash flow stands at $3,803 million whereas net income is $822 million. Here, operating cash flow is demonstrably higher than net income, marking a significant and favorable trend. The comparative analysis of the last 20 years reveals periods of both harmony and dissonance. For instance, 2015 and 2016 presented excellent figures with high operating cash and substantial net incomes. Meanwhile, negative or minimal cash flows in 2008 and 2020 correlated with substantial net losses. Given this scenario, American Airlines warrants a score of 1 on the Piotroski scale, signifying higher quality and more sustainable earnings potential.

Liquidity of American Airlines Group (AAL)

Leverage is declining?

Leverage evaluates the proportion of a company's debt compared to its equity. Lower leverage signifies less risk and increased financial stability.

In 2023, American Airlines Group's leverage ratio increased to 0.5665 from 0.6018 in 2022. This growth in leverage indicates that the company has taken on more debt relative to its equity, reflecting higher financial risk. This change may not be favorable for investors looking for financially stable companies. Charting the last 20 years, we notice leverage has fluctuated with a noticeable peak in 2021 at 0.6346 but is still substantially higher than pre-2020 levels.

Current Ratio is growing?

Current Ratio measures a company's ability to pay short-term obligations or those due within one year. It's a key measure of liquidity.

The Current Ratio for American Airlines Group (AAL) has decreased from 0.7103 in 2022 to 0.6152 in 2023, indicating a reduction in liquidity. Therefore, the score for this criterion is 0 as it means the company is potentially facing more challenges in covering short-term liabilities compared to the previous year. This rather tight liquidity metric may raise concerns for investors. Looking at the historical data over the past two decades, it seems that this decline is part of a broader trend. Only in three out of the past twenty years did the Current Ratio approach or exceed the industry's median. In recent years, the company's Current Ratio has stayed substantially below the industry median, which stood at 0.8112 for 2023.

Number of shares not diluted?

The Piotroski F-Score considers changes in shares outstanding to evaluate the potential dilution for shareholders. A decrease in outstanding shares indicates a buyback, which is typically a good sign.

Based on the data, the outstanding shares of American Airlines Group (AAL) increased from 650,345,000 in 2022 to 653,612,000 in 2023. This is an increase, not a decrease. As such, this criterion receives 0 points under the Piotroski F-Score methodology. With the increase in outstanding shares, the company may face potential dilution, which could be seen negatively by current shareholders. Over the last 20 years, the outstanding shares peaked in 2014 at 734,016,000 and have fluctuated since, stabilizing around the current level. This trend suggests that the recent increase is part of a broader context of adjustments in equity structure. Hence, for 2023, the metric reflects a neutral to mildly negative development for shareholders.

Operating of American Airlines Group (AAL)

Cross Margin is growing?

The criterion compares the Gross Margin of American Airlines Group between two consecutive years to evaluate operational efficiency. An increase signifies better cost management relative to revenue.

American Airlines Group (AAL) reported a Gross Margin of 0.2237 in 2023, compared to 0.1845 in 2022. This indicates an improvement, translating to a score of 1 point. Historically, AAL's Gross Margins have fluctuated significantly, especially during economic downturns and crises. The 0.2237 figure is modest compared to its two-decade average but is part of an upward trajectory since the pandemic impact in 2020. Interestingly, AAL's recent figures still lag behind the industry median of 0.198, suggesting competitive pressures.

Asset Turnover Ratio is growing?

The asset turnover ratio measures the efficiency with which a company uses its assets to generate sales. A higher ratio indicates better performance.

In 2022, American Airlines had an asset turnover of 0.7466, which improved to 0.8263 in 2023. This increase signifies enhanced efficiency in using assets to generate revenue. This positive trend is rewarded with 1 point according to the Piotroski Analysis. This improvement is notable against the backdrop of the last 20 years, where asset turnover ratios have fluctuated, peaking at 1.0497 in 2012 before seeing significant fluctuation. The increase in 2023 represents a rebound from the significant dip experienced in 2020 at 0.2842 and a positive recovery trajectory thereafter.