Last update on 2024-06-07

ASML Holding (ASML) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Detailed Piotroski F-Score analysis of ASML Holding (ASML) for 2023 reveals a strong financial position with a score of 7/9, indicating healthy investment.

Short Analysis - Piotroski Score: 7

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

ASML Holding has been analyzed based on the Piotroski F-Score criteria, achieving a score of 7 out of 9. On profitability, ASML meets criteria for positive net income, positive cash flow from operations, and an increasing return on assets, although operating cash flow is lower than net income, raising a potential red flag. For liquidity, ASML shows improved current ratio and fewer outstanding shares but increased leverage, indicating higher financial risk. Regarding operating efficiency, the company shows improving gross margin and asset turnover ratio.

Insights for Value Investors Seeking Stable Income

ASML Holding demonstrates strong operational performance with a Piotroski score of 7, emphasizing profitability and improved efficiency indicators. However, there are concerns with increased leverage and cash flow from operations being lower than net income, which may imply potential risks. It is worth looking into ASML Holding further, keeping these concerns in mind. Generally, it stands as a strong candidate for investment within the technology sector.

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

Profitability of ASML Holding (ASML)

Company has a positive net income?

Assessing net income allows investors to gauge a company's profitability over the reported period.

ASML Holding's net income for 2023 stands at €7,839 million, indicating a positive outcome. This upward trend can be juxtaposed with the company's historical performance, revealing an impressive trajectory from past fluctuations, particularly negative figures in 2003 and 2009. Given the positive net income of 2023, ASML justifiably earns 1 point in the Piotroski Analysis, emphasizing a healthy financial condition. The continued ascent from a net income of €5624.2 million in 2022 further accentuates this favorable trend.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a measure of the cash generated by a company's regular business operations, and positive CFO indicates a company's ability to generate sufficient cash flow to maintain and grow its operations without the need for external financing.

For ASML Holding (ASML), the Cash Flow from Operations (CFO) in 2023 is €5,443,400,000, which is positive. This qualifies for a point in the Piotroski F-Score, indicating healthy operational performance. Analyzing the last 20 years of CFO data reveals substantial growth, showcasing a strong ability to generate cash from core operations. For instance, the CFO has increased significantly from €508,443,612 in 2003 to €10,845,800,000 in 2021, although there was a subsequent decline to €8,486,800,000 in 2022 and €5,443,400,000 in 2023. The trend remains positive overall, reflecting robust operational efficiencies and improved business processes over two decades. The recent reduction in CFO could be attributed to various factors including changes in working capital or one-time expenditures, but it still remains significantly above historic levels, indicating a healthy financial posture.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures the efficiency of a company in generating profit from its assets. A rising ROA indicates improving efficiency.

For ASML Holding (ASML), the ROA increased from 0.1691 in 2022 to 0.2056 in 2023. This suggests an improvement in ASML's ability to generate profit from its assets, adding a point under Piotroski's Analysis. However, when comparing this to the industry median ROA, which was 0.4654 in 2023, it appears that ASML is still underperforming relative to its peers. Although the trend for ASML is positive, indicating improved efficiency, there is room for growth when benchmarked against the industry standards. Consequently, this change in ROA is a good sign but suggests potential for further enhancement.

Operating Cashflow are higher than Netincome?

The Piotroski F-Score seeks to identify firms with sound operational efficiency and improving financial strength. One of the criteria used is whether a company’s operating cash flow is higher than its net income, as this indicates robust cash-generating ability and can suggest lower earnings manipulation.

In 2023, ASML Holding (ASML) reported an Operating Cash Flow (OCF) of €5,443 million and a Net Income of €7,839 million. Here, the OCF is notably lower than the Net Income. This disparity raises questions regarding the quality of the reported earnings and suggests that ASML might be experiencing longer cash conversion cycles or higher levels of non-cash revenue components. Historically, ASML has exhibited volatility between its OCF and Net Income, with certain years like 2021 favoring a higher OCF to Net Income ratio. In contrast, 2023’s OCF value being lesser than its Net Income does not add a point as per the Piotroski F-Score criterion, signifying a potential red flag in operational cash efficiency in the latest fiscal year.

Liquidity of ASML Holding (ASML)

Leverage is declining?

Change in Leverage measures the company's financial risk by comparing its current leverage ratio to the previous year's ratio. It’s essential because increasing leverage may indicate growing debt levels relative to equity, posing a higher financial risk.

ASML Holding exhibits an increase in leverage from 0.0968 in 2022 to 0.1159 in 2023, reflecting a rise in financial risk as the company is more financed by debt. This trend is particularly concerning as it breaks a previous trend of decreasing leverage, signaling a potential shift in financial strategy or unforeseen financial pressures. For instance, in the last decade, ASML showed a generally downward trend in leverage until 2021, constituting a substantial deviation. Thus, no point is added under the Piotroski analysis since the company's financial leverage increased.

Current Ratio is growing?

The 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. An increasing current ratio could imply better liquidity and an enhanced capability to cover the short-term liabilities.

The Current Ratio for ASML Holding has increased from 1.2826 in 2022 to 1.4989 in 2023. This trend is certainly positive as it indicates improved liquidity and a stronger position for the company to meet its short-term obligations. Historically, while the latest current ratio of 1.4989 is lower than ASML's historical averages from 2003 to 2021 which often stayed above 2.5, it reflects an uplift from the 2022 figure. This score earns ASML 1 point for this criterion in the Piotroski analysis.

Number of shares not diluted?

The change in shares outstanding is a critical measure that reflects whether a company is issuing additional shares or buying back shares. A decrease in outstanding shares is often viewed positively as it indicates share buybacks, which can enhance shareholder value.

Between 2022 and 2023, ASML Holding's outstanding shares decreased from 397,700,000 to 393,800,000, receiving a point for this criterion. This trend is positive, suggesting that ASML Holding is engaging in share buybacks, a move typically seen as a boost for existing shareholders. Historically, the outstanding shares have seen fluctuations, peaking at 439,693,000 in 2014 and steadily decreasing onwards, reinforcing the commitment to enhance shareholder value through buyback strategies.

Operating of ASML Holding (ASML)

Cross Margin is growing?

Gross margin measures the percentage of revenue that exceeds the cost of goods sold. It is a good indicator of a company's financial health and operational efficiency.

The gross margin for ASML Holding increased from 0.5054 in 2022 to 0.5129 in 2023, reflecting a positive trend. This 0.0075 increase indicates improved cost management and operational efficiency. Comparing the historical data, ASML consistently performed above the industry median gross margin in most years, demonstrating robust market positioning and competitiveness. Thus, ASML Holding earns 1 point for this criterion as the margin is higher in 2023.

Asset Turnover Ratio is growing?

Asset Turnover is a measure of a firm's efficiency in using its assets to generate sales. An increased asset turnover ratio indicates better performance

ASML Holding's Asset Turnover increased from 0.6365 in 2022 to 0.7228 in 2023, garnering 1 point in the Piotroski Score. This is a notable improvement and highlights that ASML has become more efficient in utilizing its asset base to generate revenue. Historical data over the past 20 years suggests that the company's asset turnover performance has shown fluctuations, reaching highs of 0.9507 in 2007 and lows of 0.4158 in 2009. The recent upward trend is encouraging and reflects positively on the company's operational efficiency and asset management strategies.