Last update on 2024-06-07

ACADIA Pharmaceuticals (ACAD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Explore Piotroski F-Score analysis of ACADIA Pharmaceuticals (ACAD) for 2023, revealing profitability, liquidity, and leverage insights with a final score of 5/9.

Short Analysis - Piotroski Score: 5

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

ACADIA Pharmaceuticals (ACAD) was evaluated using the Piotroski F-Score system, which assesses financial health based on 9 criteria in profitability, liquidity, and operating efficiency. Here's how ACAD scored: 1. Profitability: The net income is negative (-$61.29 million). Cash flow from operations is positive ($16.7 million). Return on assets improved but still negative. 2. Liquidity: Leverage decreased, indicating reduced financial risk, but the current ratio declined, suggesting weaker short-term financial health. The company issued more shares, leading to potential dilution. 3. Operating Efficiency: Gross margin decreased, but asset turnover ratio improved. Overall, ACAD scored 5 out of 9, indicating moderate financial health.

Insights for Value Investors Seeking Stable Income

Given the assessment, ACADIA Pharmaceuticals (ACAD) shows some encouraging signs, particularly in cash flow and operational efficiency improvements. However, the consistent trend of negative net income, declining liquidity, and potential share dilution presents concerns. An investor might want to look more closely into these areas and consider the company's potential for future profitability and growth. A cautious approach is recommended; further research into recent developments and overall industry conditions would be beneficial before making an investment.

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

Profitability of ACADIA Pharmaceuticals (ACAD)

Company has a positive net income?

Net income, also known as net profit, is the amount of profit a company remains with after all expenses have been deducted from revenue. Positive net income indicates profitability, while negative net income represents a loss.

ACADIA Pharmaceuticals (ACAD) reported a net income of -$61.29 million in 2023, which is negative. This result does not add a point in the Piotroski F-Score, as the benchmark for this criterion is positive net income. Over the past 20 years, ACADIA Pharmaceuticals has generally faced challenges in achieving profitability, with mostly negative net incomes, except for 2010 when it recorded a positive net income of $15.14 million. The ongoing trend of persistent negative net income suggests financial difficulties in terms of achieving profitability, which is a concern for long-term investors.

Company has a positive cash flow?

Evaluating the Cash Flow from Operations (CFO) criterion, checks whether the company generates positive operational cash flow, indicating operational efficiency and profitability.

For ACADIA Pharmaceuticals (ACAD), the Cash Flow from Operations (CFO) in 2023 is $16,702,000, which is indeed positive. Historically, this marks a significant turnaround, as ACADIA has mostly reported negative CFO figures over the last two decades, with operating cash flows reaching as low as -$217,857,000 in 2017. The positive CFO in 2023, therefore, represents a substantial improvement and suggests growing operational efficiency. This positive trend is crucial for the company as it indicates an ability to generate cash from its core operations without relying on external financing, thereby scoring 1 point in Piotroski Analysis.

Return on Assets (ROA) are growing?

Change in ROA measures the company's ability to generate profits relative to its assets, comparing year-over-year efficiency.

ACADIA Pharmaceuticals' ROA increased from -0.3354 in 2022 to -0.0917 in 2023, translating to an improvement of 0.2437. While still negative, this substantial uptick indicates a significant reduction in the company’s losses relative to its assets. This improvement is crucial as it demonstrates better operational performance, despite ACADIA still lagging far behind the industry median ROA, which stood at 0.4518 in 2023. Hence, for this criterion, we add 1 point.

Operating Cashflow are higher than Netincome?

The criterion here is that the operating cash flow (OCF) should be higher than net income. This suggests that the company is able to generate positive cash flow from its core operations, which is a strong indicator of operational efficiency and financial health. It is considered important because a company that generates cash more than it reports in profits is generally seen as having quality earnings that are less manipulated.

For ACADIA Pharmaceuticals (ACAD) in 2023, the operating cash flow was $16,702,000, whereas the net income was negative at -$61,286,000. This indicates that ACAD is able to generate cash flow from core operations despite reporting a net loss for the year. Historically, looking at the last 20 years, 2023 is a unique year where the OCF has turned positive for the first time, and is also higher than net income, which suggests an improvement in the company's cash generation capabilities. This trend is a good sign as it implies operational efficiency. Therefore, based on this criterion, ACAD scores 1 point.

Liquidity of ACADIA Pharmaceuticals (ACAD)

Leverage is declining?

This criterion assesses the company's ability to manage its debt levels effectively, with a decrease in leverage considered favorable.

In 2023, ACADIA Pharmaceuticals (ACAD) had a leverage ratio of 0.0638, compared to 0.0896 in 2022. This indicates a decrease in leverage, which is favorable—as lower leverage signifies a reduction in financial risk. Historical data shows a generally low leverage trend for the company over the last 20 years, with 2022 being an outlier with higher leverage. Given this trend, ACAD maintains a healthy balance sheet in 2023, resulting in a positive score for this criterion.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to cover its short-term obligations with its current assets. A higher ratio indicates better short-term financial health.

In 2023, ACADIA Pharmaceuticals (ACAD) has a current ratio of 2.4233, down from 4.0431 in 2022. This decline suggests that the company's ability to cover short-term liabilities has weakened. Over the last 20 years, the company shows fluctuating trends in its current ratio, with highs of 26.9895 in 2013 and lows matching recent figures. In 2023, ACADIA's ratio is below the last 20 years' industry median of 5.7831, indicating a weaker liquidity position compared to peers. Although the decrease from the previous year is concerning, it is not severely out of line with periodic dips seen historically.

Number of shares not diluted?

The number of outstanding shares represents the total shares of a company's stock that are currently owned by all its shareholders, including share blocks held by institutional investors and restricted shares owned by the company’s officers and insiders. It is crucial in evaluating company ownership dilution and equity financing activities.

ACADIA Pharmaceuticals (ACAD) saw an increase in its outstanding shares from 161,683,000 in 2022 to 163,819,000 in 2023. This increment means that the company issued additional shares, leading to the potential dilution of existing shares. With a 1.32% rise from the previous year, it suggests ongoing financing activities which might be necessary for business expansions or operations but dilutive to existing shareholders. Over the last 20 years, ACADIA's outstanding shares have generally increased, from 11,365,000 in 2003 to 163,819,000 in 2023, reflecting a trend of equity issuance.

Operating of ACADIA Pharmaceuticals (ACAD)

Cross Margin is growing?

The Change in Gross Margin compares two consecutive years’ gross margins. A Gross Margin increase adds 1 point as it indicates improved pricing power and cost control.

The Gross Margin for ACADIA Pharmaceuticals (ACAD) decreased from 0.9803 in 2022 to 0.9427 in 2023. This represents a deterioration in gross margin performance. Analyzing long-term data, ACADIA’s gross margin was consistently above industry medians, only dipping below the 90% mark in recent years. Despite relative outperformance versus industry medians (0.4518 in 2023), the observed reduction signifies potential issues in cost management or pricing power. Therefore, it does not merit an additional point for positive gross margin trend.

Asset Turnover Ratio is growing?

Asset turnover quantifies a company's efficiency in using its assets to generate sales revenue. Higher turnover signifies better efficiency.

ACADIA Pharmaceuticals (ACAD) showed a significant improvement in asset turnover, with the ratio rising from 0.8032 in 2022 to 1.0869 in 2023. This growth in asset turnover indicates better utilization of their assets to generate sales. Historically, ACAD's asset turnover was substantially lower, even dropping to as low as 0.0002 in 2014. The recent increase is a positive trend, suggesting improved operational efficiency. Therefore, this criteria scores a point.