Last update on 2024-06-07

Adesso (ADN1.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Adesso (ADN1.DE) Piotroski Score Analysis for 2023 shows a stability in financial health with a score of 4/9, highlighting profitability and liquidity metrics.

Short Analysis - Piotroski Score: 4

We're running Adesso (ADN1.DE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score assesses a company's financial health based on nine criteria related to profitability, liquidity, and efficiency, with scores ranging from 0 to 9. Adesso (ADN1.DE) was assessed and scored a 4 out of 9. The company's net income and cash flow are positive, indicating profitability and good cash management. However, the ROA has sharply declined, suggesting decreased efficiency in generating profits from assets. Leverage increased, and the current ratio decreased, signaling potential financial risk and reduced liquidity. Additionally, there's a small increase in shares outstanding, which could dilute existing shareholders' value. The gross margin decreased, indicating reduced profitability, but the asset turnover ratio increased, reflecting better asset utilization.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 4 out of 9, Adesso (ADN1.DE) presents a mixed financial health picture. The positive net income and strong cash flow are bullish signs, but reduced ROA, increased leverage, and lower current ratio pose risks. The slight dilution in shares and decrease in gross margin also warrant caution. Investors might want to conduct further detailed analysis and consider industry trends before investing in this stock, focusing on the company's ability to address these weaker aspects and improve overall financial stability.

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

Profitability of Adesso (ADN1.DE)

Company has a positive net income?

Net income measures a company’s total earnings and is a key indicator of profitability. A positive net income suggests that the company is profitable after all expenses.

For Adesso (ADN1.DE), the net income for 2023 is reported at €3,205,000. Since this value is positive, it adds 1 point to our Piotroski score. Historically, examining the net income over the past 20 years shows significant fluctuations. For example, in 2020, the net income was €20,954,000, reflecting a strong performance compared to earlier years like 2012, where it was only €693,000. Despite the lower net income in 2023 compared to some peak years, the positive net income still remains a favorable factor for the company.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a critical financial metric that indicates the amount of cash a company generates from its regular operating activities. This parameter is crucial as it signifies the financial health and operational efficiency of the company.

In 2023, Adesso (ADN1.DE) reported a CFO of €76,860,000, which is notably positive. Adding one point to the score, this positive value suggests that Adesso is generating substantial cash through its core business operations. This trend is part of a consistent growth pattern in CFO over the past two decades, barring some fluctuations. Since 2006, where CFO data was unavailable, the company improved its operational cash flow from €5,884,000 in 2007 to the current €76,860,000 in 2023. Such consistent and positive CFO growth speaks to robust operational management and can reassure investors of Adesso's efficiency in generating cash sustainably.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. A rising ROA indicates improved efficiency in generating profits from assets.

For Adesso (ADN1.DE), the ROA in 2022 was 0.0472, whereas in 2023, it declined to 0.0044. This downward trend is concerning as it implies that the company's ability to generate profit from its assets has significantly weakened over the year. Despite the company's efforts, the decline is stark: from generating 4.72% return on each asset dollar to merely 0.44%. Comparing to the industry median ROA which has been relatively stable around 0.30 to 0.34 over the last years, Adesso has clearly underperformed, indicating room for substantial improvements in asset utilization moving forward. Hence, this criterion would score 0 points.

Operating Cashflow are higher than Netincome?

Explain the criterion for Adesso (ADN1.DE) and why it is important to consider

For Adesso (ADN1.DE), the criterion examines whether the operating cash flow (OCF) is higher than the net income. This indicates the company's ability to generate cash effectively, beyond just accounting profits. It's pivotal as it highlights the quality of earnings; high-quality earnings are backed by real cash flows, not just accounting adjustments. In this case, Adesso's OCF in 2023 is €76.86 million, significantly higher than the net income of €3.205 million.

Liquidity of Adesso (ADN1.DE)

Leverage is declining?

Change in Leverage: Compare the Leverage of 0.1745 in 2022 with the Leverage of 0.3131 in 2023 and check if Leverage increased or decreased.

For Adesso (ADN1.DE), leverage has increased from 0.1745 in 2022 to 0.3131 in 2023. This rise in leverage indicates that the company has increased its reliance on debt financing over the referenced period. Over the past twenty years, we observe various fluctuations in Adesso's leverage, peaking at 0.3251 in 2019 and showcasing lower leverage periods from 2006 to 2012 where leverage was significantly lower, occasionally close to zero. The upward trend in leverage from 2022 to 2023 is generally viewed with caution as increased leverage can lead to higher financial risk for the company, potentially affecting its solvency and financial stability in adverse market conditions. Therefore, in line with the Piotroski F-Score criteria, no additional point is awarded for this increment in leverage.

Current Ratio is growing?

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

For Adesso (ADN1.DE), the current ratio in 2023 is 1.3591, compared to 1.5839 in 2022. This indicates a decrease in the current ratio from 2022 to 2023, which is generally a negative signal concerning liquidity. Adesso's current ratio has varied significantly over the past two decades, peaking at 1.6265 in 2010 and reaching a low of 1.2785 in 2020. In 2023, the current ratio is not only below its 2022 level but also lower than the industry median current ratio of 1.4169. This downward trend may raise concerns about the company's short-term financial stability. Therefore, the score for the current ratio criterion is 0.

Number of shares not diluted?

Change in Shares Outstanding measures the number of issued shares by the company. It's critical as it impacts the ownership proportion, dividends, and potentially stock price.

The Outstanding Shares for Adesso have increased from 6,507,846 in 2022 to 6,515,102 in 2023. This represents a slight increase, signalling potential new equity issuance or share-based compensation. Looking at the trend over the past 20 years, the number of shares has generally been on the rise. Thus, for the Piotroski Analysis criterion of Change in Shares Outstanding, Adesso scores 0 points.

Operating of Adesso (ADN1.DE)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold. It is an essential metric for assessing a company's profitability and operational efficiency.

Adesso's Gross Margin has decreased from 0.2994 in 2022 to 0.2854 in 2023, indicating a decline. This trend is considered negative as it suggests that the company is experiencing a reduction in its profitability. It is important to consider this decline in the context of industry trends, where the median gross margin of the industry was 0.3391 in 2023, above Adesso's margin. Thus, Adesso's performance in this area requires attention.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. A higher ratio often indicates better performance.

In 2023, Adesso (ADN1.DE) achieved an Asset Turnover of 1.5759, up from 1.4846 in 2022. This increase suggests improved efficiency in utilizing assets to generate revenue. Historically, Adesso's Asset Turnover has shown variability, peaking at 1.9692 but declining to 1.4598 in 2021. The increase in 2023 reverses the previous downward trend, signaling potential operational improvements. This positive shift adds 1 point in the Piotroski Analyses, highlighting enhanced utilization of assets.