Last update on 2024-06-06

Air Products & Chemicals (APD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Analysis of Air Products & Chemicals (APD) using Piotroski F-Score for 2023 reveals a score of 4/9, indicating moderate financial health based on profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 4

We're running Air Products & Chemicals (APD) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

We're taking a close look at Air Products & Chemicals (APD) using the Piotroski F-Score, which ranges from 0 to 9 and helps assess a company's financial strength. APD scores 4 out of 9 which is straight average according to the F-Score. 1. **Profitability**: APD has a positive net income, cash flow, and excellent quality earnings as cash flow exceeds net income but shows some decline in efficiency (ROA). 2. **Liquidity**: There's a rise in leverage and a decrease in the current ratio, indicating a need for improved liquidity management. 3. **Operating Efficiency**: APD's gross margins have improved, although its asset turnover ratio shows a decline. Overall, the company displays mixed financial health with positive aspects in profitability but concerns in liquidity and operational efficiency.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski score of 4, Air Products & Chemicals (APD) sits in the middle ground. Positive profitability shines, but liquidity and efficiency aspects raise flags. For potential investors, conducting additional research on market conditions, debt management, and long-term strategies is advisable before making decisions. It's a mixed bag, so investing cautiously or exploring other opportunities may be smarter. Consider diversification to balance risks.

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

Profitability of Air Products & Chemicals (APD)

Company has a positive net income?

Examining the net income of a company allows investors to determine if it has been profitable. Positive net income indicates financial health and potential for growth, adding to investor confidence.

The net income for Air Products & Chemicals (APD) in 2023 stands at $2,300,200,000, which is positive. This is a favorable trend and implies that the company has been able to generate profit. Over the last two decades, APD has shown varied net income figures with the most significant spike occurring in 2017 at $3,000,400,000. Despite some volatility, the general trend over the past five years suggests stable growth, thus earning the company 1 point under the Piotroski criteria.

Company has a positive cash flow?

Cash Flow from Operations (CFO) determines the net cash generated from operating activities. It is crucial as it reflects a company's ability to generate sufficient positive cash flow to maintain and grow its operations.

Air Products & Chemicals (APD) reported a Cash Flow from Operations (CFO) of $3,206,300,000 in 2023, which is positive. This is a favorable indicator as positive CFO demonstrates that the company is able to generate healthy net cash from its core operational activities, affirming its operational efficiency. Over the last 20 years, APD has consistently generated positive cash flow from operations, with significant growth from $1,036,000,000 in 2003 to over $3,206,300,000 in recent years. This trend underscores the company's robust financial health and its ability to generate cash through its principal business activities. Consequently, APD scores 1 point for the CFO criterion in the Piotroski analysis.

Return on Assets (ROA) are growing?

The criterion measures the improvement in the company's efficiency in generating profits from its assets.

Air Products & Chemicals (APD) reported a Return on Assets (ROA) of 0.0777 in 2023, which is a slight decline from the 0.0835 reported in 2022. This indicates that APD's efficiency in generating profits from its assets has deteriorated slightly over the past year. This downward trend can be attributed to various market conditions. Historically, over the last 20 years, APD's ROA has experienced fluctuations, typically clustering around the 0.08 mark, as opposed to the industry median, which has often stood higher at around 0.22-0.24. Although this deviating trend is specific to 2023, given the broader picture, it can suggest room for improvement in maximising asset efficiency. Hence, according to the Piotroski F-Score calculation, this criterion scores 0 points, reflecting a need for better asset management.

Operating Cashflow are higher than Netincome?

This criterion checks if a company’s operating cash flow is higher than its net income. It's crucial because it indicates strong cash generation and quality earnings.

In 2023, Air Products & Chemicals (APD) demonstrated a robust operating cash flow of $3,206,300,000 compared to a net income of $2,300,200,000. The operating cash flow surpassing the net income adds a solid point to APD's evaluation, highlighting excellent earnings quality and healthy cash flow dynamics. Historically, this trend shows consistent growth in both metrics, underlining sound financial management and robust operational performance. Thus, this trend is a positive signal for potential investors and stakeholders.

Liquidity of Air Products & Chemicals (APD)

Leverage is declining?

Change in Leverage measures the difference in a company's financial leverage between two periods.

In the case of Air Products & Chemicals (APD), the leverage ratio increased from 0.2824 in 2022 to 0.3144 in 2023. This is a concerning trend as a higher leverage ratio implies that the company is taking on more debt relative to its equity, which may indicate higher financial risk. Historically, APD's leverage has fluctuated over the last two decades, peaking at 0.3086 in 2020 before slightly decreasing in 2021 but ultimately rising again in 2023. The increase in leverage suggests that investors should exercise caution as this could impact the company’s financial stability and its ability to meet long-term obligations. For this criterion, APD scores 0 points as the leverage has increased compared to the previous year.

Current Ratio is growing?

Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates a stronger liquidity position and is generally favorable as it suggests better capability in covering short-term debts.

For Air Products & Chemicals (APD), the Current Ratio decreased from 1.8128 in 2022 to 1.3349 in 2023. This marks a decline in the company's ability to cover its short-term liabilities with its short-term assets, resulting in a score of 0 for this Piotroski criterion. This trend indicates a weakness in liquidity, particularly when compared to an industry median current ratio of 1.5873. Historically, APD's current ratio has fluctuated but has seen stronger levels in previous years, peaking at 3.5937 in 2020. This recent decrease raises red flags regarding the company's short-term financial health.

Number of shares not diluted?

Change in Shares Outstanding measures whether the company is diluting shareholder value. A decrease in shares suggests good capital management, enhancing per-share value.

For Air Products & Chemicals (APD), the Outstanding Shares increased marginally from 222,000,000 in 2022 to 222,300,000 in 2023. Examining the last 20 years, the trend shows varied changes, with the initial decade seeing more fluctuation and the latter years becoming relatively stable. The increase in 2023 means no points are given as it indicates slight dilution. This rise might be attributed to new equity issuance or share-based compensation. It's a minor change but should be monitored.

Operating of Air Products & Chemicals (APD)

Cross Margin is growing?

Change in Gross Margin measures the incremental growth in a company’s efficiency and profitability by comparing gross margin over two periods.

In 2023, Air Products & Chemicals (APD) reported a Gross Margin of 0.299, up from 0.2646 in 2022. This indicates an improvement of 0.0344, or roughly 34.4 percentage points. This positive change is effectively captured in the Piotroski score, hence earning 1 point. Additionally, with a longer horizon of historical data, APD demonstrates a resilient ability to outpace the industry median, which lags notably behind 2023 figures, indicating approximately 13 percentage points lower Gross Margins. This consistent outperformance strengthens investor confidence in its operational efficiency and profitability potential. Thus, the trend is good according to the Piotroski criterion.

Asset Turnover Ratio is growing?

Change in asset turnover represents the efficiency of a company's use of its assets to generate sales. It's crucial to monitor as it reflects operational efficiency.

The asset turnover for Air Products & Chemicals (APD) decreased from 0.4699 in 2022 to 0.4257 in 2023. This signifies a decline, suggesting reduced efficiency in using its assets to generate revenue. Over the past 20 years, we see fluctuations with a peak of 0.8421 in 2007 and a general downward trend from 2014 onward. The 2023 figure is among the lowest, marking a concerning trend. Therefore, no point is added for this criterion.