Last update on 2024-06-07

Alliance Resource Partners (ARLP) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Explore the Piotroski F-Score Analysis of Alliance Resource Partners (ARLP) for 2023. Find out the financial health of ARLP with a detailed score of 5/9.

Short Analysis - Piotroski Score: 5

We're running Alliance Resource Partners (ARLP) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Alliance Resource Partners (ARLP) has been evaluated using the Piotroski F-Score, a measure of financial strength based on nine criteria. ARLP scored 5 out of 9, reflecting a balanced financial position with both strengths and weaknesses. Strengths include a positive net income, robust cash flow from operations, declining leverage, a high operating cash flow relative to net income, and a reduction in the number of shares outstanding. On the downside, ARLP has experienced a recent dip in the current ratio, a decline in gross margin, and a drop in asset turnover ratio. These mixed results highlight both the resilience and areas of concern within ARLP's financial health.

Insights for Value Investors Seeking Stable Income

ARLP seems to be a stable and relatively strong company with a good cash flow and decreased leverage, signifying prudent financial management. However, the recent declines in their current ratio, gross margin, and asset turnover ratio are areas to monitor. If you are considering investing in ARLP, it might be worth further investigating these areas of concern and closely following the company's future quarterly reports to ensure these metrics improve. Overall, ARLP presents a potentially worthwhile investment but proceed with some caution due to the mixed signals in certain areas.

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

Profitability of Alliance Resource Partners (ARLP)

Company has a positive net income?

Net income is a crucial profitability measure indicating the company's retained earnings after all expenses, taxes, and costs. Positive net income is fundamental for sustainability and growth.

For the year 2023, Alliance Resource Partners (ARLP) reported a net income of $630,118,000, which is positive. This earnes one point in the Piotroski analysis. Analyzing the last 20 years, ARLP has shown a general upward trajectory in net income, with only a few dips, such as in 2020 (net loss of $129,220,000). The trend indicates resilience and recovery, particularly post-2020, displaying a strong rebound with $182,771,000 in 2021 and subsequently higher figures in the following years. The sustained growth in net income is a positive indicator of the company's financial health and efficient management.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's regular business activities. Positive CFO is crucial as it indicates the company is generating sufficient cash to maintain and grow operations without external financing.

Alliance Resource Partners (ARLP) reported a positive CFO of $830.642 million in 2023. This is a strong indicator of the company's robust operational efficiency and financial health. Reviewing the historical data over the past 20 years, ARLP has consistently exhibited positive cash flow from operations, reflecting stability and strong operational management. The consistent rise over recent years culminates in the 2023 figure, suggesting effective measures in cost management and revenue generation. It also implies a low likelihood of liquidity issues, fostering investor confidence.

Return on Assets (ROA) are growing?

Explain the criterion for Alliance Resource Partners (ARLP) and why it is important to consider

Return on Assets (ROA) is a critical metric that evaluates how efficiently a company is using its assets to generate earnings. For ARLP, comparing ROA between 2022 and 2023 helps in understanding the change in operational efficiency. If the ROA increased in 2023, it would signal that the company's operating performance has improved, thus justifying an addition of 1 point in the Piotroski score.

Operating Cashflow are higher than Netincome?

Comparing Operating Cash Flow with Net Income helps us assess a company's ability to generate cash relative to its reported net earnings. A higher cash flow indicates strong liquidity and potential financial stability.

The Operating Cash Flow (OFC) for Alliance Resource Partners (ARLP) in 2023 is $830,642,000, notably higher than the Net Income, which stands at $630,118,000. This results in adding 1 point according to the Piotroski criteria. Historically, ARLP's operating cash flow has experienced a fluctuating yet generally upward trend over the last two decades, peaking in 2023. Moreover, the company has shown a correlation between its rising operational cash flow and net income, suggesting strong cash generation capabilities integral to sustaining its operations. This positive trend reflects well on ARLP's financial robustness and liquidity standing.

Liquidity of Alliance Resource Partners (ARLP)

Leverage is declining?

Change in leverage measures how a company's debt levels have fluctuated over a specific period, offering insight into its financial risk and stability.

When examining Alliance Resource Partners (ARLP), leverage, as indicated by the ratio, has decreased from 0.15 in 2022 to 0.1185 in 2023. This reduction suggests that ARLP has been working on decreasing its reliance on debt to finance its operations, indicating financial prudence. Over a 20-year period, ARLP's leverage has shown a general declining trend, dropping from 0.535 in 2003 to 0.1185 in 2023. This long-term downtrend corroborates ARLP's efforts to manage debt more effectively, amounting to a significant reduction over two decades. Therefore, this is a favorable trend. Add 1 point for the reduction in leverage for the Piotroski Analysis.

Current Ratio is growing?

This criterion examines the Current Ratio, which is defined as Current Assets divided by Current Liabilities, for Alliance Resource Partners (ARLP). The Current Ratio measures a company's ability to pay its short-term obligations with its short-term assets. A higher Current Ratio indicates more liquidity and signifies better financial health, while a decreasing ratio could signify potential liquidity problems.

The Current Ratio for ARLP has decreased from 2.573 in 2022 to 2.269 in 2023. The company will not receive a point for this criterion. Historically, the Current Ratio for ARLP has been above the industry median in most of the last 20 years. However, the drop in 2023 indicates that the liquidity position of ARLP has weakened compared to previous years and the industry average, which now stands at 2.3682. Although ARLP's current ratio is just below the industry median, falling from 2.573 in a year where the median was lower at 2.2489 may concern analysts who prefer seeing stronger liquidity ratios.

Number of shares not diluted?

Change in shares outstanding refers to the difference in the number of shares a company has issued and authorized between different periods.

For 2022, Alliance Resource Partners had 127,195,219 outstanding shares. In 2023, this number reduced marginally to 127,180,312. The decrease in outstanding shares is actually a good sign according to Piotroski analysis, because it often reflects share buybacks or reductions, indicating management’s confidence in the company's future prospects. Coupled with historical data demonstrating fluctuations but generally maintaining a stable share base, this move might be perceived positively. Thus, for this criterion, ARLP earns 1 point.

Operating of Alliance Resource Partners (ARLP)

Cross Margin is growing?

The criterion checks if Alliance Resource Partners’ gross margin has increased compared to the previous year, indicating improved operational efficiency.

The gross margin for Alliance Resource Partners (ARLP) decreased from 0.3063 in 2022 to 0.2928 in 2023. This signifies a decrease in operational efficiency as the gross margin is a measure of the proportion of revenue that exceeds the cost of goods sold. Evaluating the long-term trends over the last 20 years, ARLP’s gross margins have generally fluctuated, peaking in 2014 at 0.3987 and hitting a significant low in 2020 at 0.1009. Compared to the industry, ARLP's 2023 gross margin of 0.2928 is below the industry median gross margin of 0.3242, further highlighting the need for improved efficiency. Given these numbers, ARLP is awarded 0 points for this criterion.

Asset Turnover Ratio is growing?

Asset turnover ratio indicates how efficiently a company uses its assets to generate sales. A higher ratio signifies better performance.

In 2023, Alliance Resource Partners (ARLP) reported an asset turnover ratio of 0.9306, compared to 0.9903 in 2022. This reflects a decrease in asset turnover. Therefore, according to the Piotroski analysis, the company would not gain a point here as its asset turnover did not increase. Over the last 20 years, ARLP’s asset turnover ratio has shown a general decline, starting from a high of 1.7372 in 2003 and experiencing a significant drop to 0.5589 in 2020, possibly due to external factors such as the COVID-19 pandemic. The marginal improvement in 2021 to 0.7302 followed by an increase to 0.9903 in 2022 suggests recovery, but the drop in 2023 shows inconsistency. This downward trend could raise concerns about ARLP’s asset efficiency over the long term.