Last update on 2024-06-07

Akzo Nobel (AKZA.AS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Detailed Piotroski F-Score analysis of Akzo Nobel (AKZA.AS) for 2023 with a score of 7/9. Financial metrics: net income, ROA, cash flow, and gross margin.

Short Analysis - Piotroski Score: 7

We're running Akzo Nobel (AKZA.AS) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

We assessed Akzo Nobel (AKZA.AS) using the Piotroski F-Score, which measures a company's financial health on a scale from 0 to 9 based on nine different criteria involving profitability, liquidity, and operational efficiency. Akzo Nobel scored a 7, indicating a relatively strong financial position. Key positive points included a positive net income (€442 million), positive cash flow from operations (€1,126 million), growing return on assets (ROA), higher operating cash flow compared to net income, reducing leverage, consistent reduction in outstanding shares, and an increasing gross margin. However, the current ratio decreased, indicating a potential concern in liquidity, and the Asset Turnover Ratio fell, suggesting a decline in efficiency in using its assets to generate revenue.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski score of 7, Akzo Nobel seems to be a strong and relatively undervalued investment. The company shows solid profitability, strong cash flow, and good financial management. However, prospective investors should be cautious about the declining current ratio and asset turnover ratio, which could hint at underlying efficiency and liquidity issues. Overall, it is worth considering for investment, but one should keep an eye on its liquidity and asset utilization trends in the future.

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

Profitability of Akzo Nobel (AKZA.AS)

Company has a positive net income?

Net income is a fundamental metric in financial analysis representing a company's profitability. A positive net income indicates that the company is making a profit.

For the year 2023, Akzo Nobel reported a net income of €442 million, which is positive. This signals profitability for the company during this period, adding 1 point to the Piotroski F-score for this criterion. Looking at the last 20 years, Akzo Nobel has shown fluctuations in net income, with significant changes occurring due to various market conditions. Notable was the dip in 2008 and 2012, where it reported net losses of -€1.086 billion and -€2.169 billion, respectively. However, in recent years the company displays a more positive trend, with profitability returning and peaking at €6.674 billion in 2018 before stabilizing around €442 million in 2023.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash a company generates from its regular business operations and is a key indicator of its financial health.

In 2023, Akzo Nobel reported a CFO of €1,126 million, indicating a positive cash flow from operations. This is crucial as it suggests that the company is successfully generating enough cash through its core business activities to sustain operations, without relying heavily on investments or financing. Historically, Akzo Nobel has shown a fluctuating CFO over the last 20 years, with a notably low of €33 million in 2019 but tops like €1,396 million in 2003 and consistently positive figures in recent years. The positive CFO in 2023 aligns well with the more favorable trend seen post-2019, marking it as a strong indicator of financial stability and operational efficiency. Thus, we add 1 point for this criterion, applauding the healthy cash flow management.

Return on Assets (ROA) are growing?

ROA, or Return on Assets, measures how effectively a company uses its assets to generate profit. It is essential for assessing operational efficiency.

Akzo Nobel's (AKZA.AS) ROA improved from 0.0246 in 2022 to 0.0302 in 2023. This indicates the company's increasing efficiency in utilizing its assets to generate profits. While an increase is positive (resulting in a score of 1), it's critical to benchmark this against the industry median, which stood at 0.3018 in 2023. Despite the improvement, Akzo Nobel's ROA remains significantly below the industry median. Thus, while the trend is favorable, the company still has room for improvements in asset utilization.

Operating Cashflow are higher than Netincome?

Operating Cash Flow being higher than Net Income is indicative of strong earnings quality. It suggests that a company’s earnings are supported by actual cash, rather than accounting adjustments, making it an essential indicator for investors.

For Akzo Nobel (AKZA.AS) in 2023, the Operating Cash Flow stood at €1,126 million, which significantly exceeds the Net Income of €442 million. This disparity reflects a higher quality of earnings and implies that the company is successfully converting its revenue into cash. Over the past decades, Akzo Nobel has shown fluctuating trends in both Operating Cash Flow and Net Income. For instance, the Operating Cash Flow dropped to as low as €33 million in 2019 and rose dramatically to €1,260 million in 2023. Similarly, Net Income varied substantially, with notable lows of -€2,169 million in 2012 and high peaks like €9,330 million in 2007. Despite these fluctuations, the ability of Akzo Nobel to generate substantial cash from operations in recent years, including 2023, reflects a positive trend and this criterion is met, adding 1 point to the Piotroski score.

Liquidity of Akzo Nobel (AKZA.AS)

Leverage is declining?

Changes in leverage can indicate financial strategy adjustments. A decrease is preferred as it shows lower debt reliance.

For Akzo Nobel, leverage slightly decreased from 0.226 in 2022 to 0.2174 in 2023, marking an improvement. Historically, leverage has fluctuated, peaking at 0.226 in 2022. This downward trend in 2023 suggests prudent financial management, earning a 1-point increase in Piotroski analysis for reduced debt dependency. Reductions in leverage are considered positive within this analytic framework as they imply strengthened financial health and lower bankruptcy risk.

Current Ratio is growing?

The Piotroski criterion checks if there has been an improvement in the current ratio compared to the previous year. It is important as it indicates if the firm has improved its liquidity position and its ability to cover short-term liabilities.

For Akzo Nobel (AKZA.AS), the Current Ratio has decreased from 1.0867 in 2022 to 1.0592 in 2023. This is a concerning trend as it indicates a decrease in the company's liquidity, signaling that the company is slightly less capable of covering its short-term liabilities than it was a year ago. When comparing to the previous 20 years of data, the current ratio in 2023 is among the lower values observed, and it falls below the industry median of 1.9399 for the same year.

Number of shares not diluted?

The criterion for evaluating the change in shares outstanding considers if the number of outstanding shares decreased.

Comparing the outstanding shares of Akzo Nobel, we see a decrease from 174.7 million in 2022 to 170.6 million in 2023. This indicates a reduction in outstanding shares, adding 1 point to the Piotroski score. Historically, from 2003 to 2023, Akzo Nobel has shown a consistent decline in outstanding shares. This trend generally reflects favorable financial maneuvering, as a company reducing its shares can signal an intention to return value to shareholders, potentially through share buybacks.

Operating of Akzo Nobel (AKZA.AS)

Cross Margin is growing?

Change in gross margin effectively discloses a company's profitability in production and core operations over the mentioned period. It is pivotal to consider as it gauges the efficiency and pricing strategy of a firm in producing goods or services relative to its competitors.

The gross margin for Akzo Nobel (AKZA.AS) increased from 0.3617 in 2022 to 0.3969 in 2023, indicating an improvement. This increase is a favorable development, contributing an additional point in the Piotroski Analysis score. More impressively, Akzo Nobel's gross margin consistently outperforms the industry's median, which marginally declined from 0.3089 in 2022 to 0.3018 in 2023. Historically, Akzo Nobel has always maintained a higher gross margin than the industry median over the past 20 years, showcasing robust pricing power and operational efficiencies. The gross margin has varied, peaking at 0.4688 in 2003 and troughing at 0.3531 in 2008 during the financial crisis. Overall, the recent year's increase reaffirms Akzo Nobel's adept management and strong market position.

Asset Turnover Ratio is growing?

The change in Asset Turnover is an essential criterion because it measures the efficiency of a company in utilizing its assets to generate revenue. An increasing ratio is a positive indicator of improved efficiency.

For Akzo Nobel (AKZA.AS), the asset turnover ratio in 2023 is 0.7282 compared to 0.758 in 2022. This indicates a decrease in asset turnover, not an increase. Therefore, Akzo Nobel would not earn a point for this criterion in the Piotroski analysis. This decrease from 0.758 to 0.7282 suggests a decline in the company's efficiency in utilizing its assets to generate revenue. Over the past 20 years, Akzo Nobel's asset turnover ratio has seen fluctuations, notably peaking at 1.0902 in 2006 and hitting a low of 0.5295 in 2018. Hence, adding 1 point for 2023 would be inaccurate as the trend has reversed, indicating potential underlying efficiency issues.