Last update on 2024-06-04

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

Detailed Piotroski F-Score analysis for Bayer (BAYN.DE) in 2023; final score: 4/9. Assessing financial health, profitability, liquidity, and more.

Short Analysis - Piotroski Score: 4

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

The Piotroski F-Score is used to judge a company's financial health with a score between 0 and 9. Bayer (BAYN.DE) was analyzed and scored a 4 out of 9, indicating moderate strength. Bayer faltered in areas such as net income, leverage, ROA, shares not diluted, gross margin, and asset turnover. Despite a positive cash flow and increasing current ratio, Bayer showed financial instability, especially with fluctuating incomes and increasing debt. Ultimately, Bayer’s moderate Piotroski score suggests caution is needed when considering investment.

Insights for Value Investors Seeking Stable Income

Given Bayer’s Piotroski score of 4, investors should be cautious. While Bayer demonstrates strong operational cash flow and improved liquidity, its negative net income, increased leverage, and declining ROA and gross margin signify potential financial instability. Investors are advised to keep an eye on these factors and consider other stocks with better financial health. It might not be the best time to invest heavily in Bayer right now.

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

Profitability of Bayer (BAYN.DE)

Company has a positive net income?

This criterion evaluates whether Bayer’s net income for the most recent fiscal year is positive. Net income is crucial as it demonstrates a company's profitability, and a positive net income typically indicates good financial health.

For the fiscal year 2023, Bayer reported a net income of -€2,941,000,000, which is negative. According to Piotroski’s score calculation, a negative net income results in 0 points for this criterion. Looking at the additional data for the past 20 years, Bayer has experienced significant fluctuations in net income, with negative results in 2019, 2020, and 2023. This trend is concerning as it suggests issues with profitability and potential challenges in maintaining financial stability. The recent negative net income could be due to operational challenges, extraordinary expenses, or other financial setbacks.

Company has a positive cash flow?

Cash Flow from Operations (CFO) looks at the amount of cash a company generates from its regular operating activities. Positive CFO indicates robust operational efficiency and the company's ability to generate sufficient cash flow to cover its operating expenses.

Bayer's CFO for 2023 stands at €5.117 billion, which is positive. This consistent positive cash flow over the last 20 years is evidenced by a series of CFO values such as €5.370 billion in 2009, reaching a peak of €9.089 billion in 2017, and showing a moderate level at €7.093 billion in 2022. This trend underscores Bayer's strength and stability in its core operations despite market fluctuations. This positive CFO earns Bayer a point in the Piotroski analysis, indicating good financial health from operational activities perspective.

Return on Assets (ROA) are growing?

Change in ROA assesses the company's ability to generate profit relative to its total assets, and an increasing trend suggests improving efficiency.

The Return on Assets (ROA) for Bayer in 2023 was -0.0244, a notable decline from 0.0339 in 2022. This shift marks a significant downturn in Bayer's asset utilization efficiency. Emphasizing this, the historical industry median for ROA has steadily trended around 0.7, starkly highlighting Bayer's performance gap. Bayer’s robust operating cash flow, consistently surpassing industry peers, did not translate into proportionate asset returns, underscoring operational inefficiencies. Therefore, Bayer does not score a point for ROA increase, reflecting fiscal challenges.

Operating Cashflow are higher than Netincome?

One criterion of the Piotroski analysis is whether the operating cash flow exceeds the net income. This indicates solid cash generation relative to reported earnings.

In 2023, Bayer (BAYN.DE) reported an operating cash flow of €5.117 billion, while their net income was -€2.941 billion. This clearly shows that the company is generating more cash from its operations than it is reporting in net income. This discrepancy is critical, as it points to robust operational efficiency and possibly conservative accounting practices. Historically, Bayer has had a consistent track record of positive operating cash flows, as observed over the past 20 years, peaking at €9.089 billion in 2016. In stark contrast, net income has shown more volatility, with significant variations such as €7.336 billion in 2017, a substantial loss of -€10.495 billion in 2020, and again a negative figure in 2023. The accruals trend also shows Bayer maintains relatively stable and moderate accrual accounting. The high operating cash flow in 2023 relative to net income thus earns a point, signaling good liquidity and operational performance despite reported losses.

Liquidity of Bayer (BAYN.DE)

Leverage is declining?

Change in Leverage measures the company's debt level changes over time. A decreasing leverage ratio suggests a healthier balance between equity and debt.

In 2022, Bayer's leverage ratio was 0.2705, while in 2023, it rose to 0.3283. Over the last two decades, the leverage ratio has fluctuated, reaching a peak in 2006 at 0.3478 and dropping to 0 on several occasions. The increase in leverage in 2023 is concerning as it indicates that Bayer is potentially taking on more debt relative to its equity. Therefore, no point is awarded for this criterion because the company’s financial risk appears to have increased, which could have negative implications for financial stability.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations. It is important as it indicates financial health.

In 2023, Bayer's Current Ratio stood at 1.2749, an increase from 1.0763 in 2022. This rise is notable, given that the Current Ratio indicates the firm's ability to meet short-term obligations with short-term assets. The improvement adds one point to the Piotroski score. Over a 20-year period, this is one of the lower ratios, suggesting caution, yet it’s a positive trend as it aligns closer to the industry's median of 1.288 for 2023. Hence, this development should be considered good for Bayer's liquidity.

Number of shares not diluted?

The criterion focuses on changes in the number of outstanding shares, which is crucial for evaluating the issuance of new shares.

The number of outstanding shares for Bayer remained unchanged at 982,420,000 between 2022 and 2023. Therefore, no point is awarded for this criterion, generating a score of 0. When examining the long-term data, Bayer has seen a gradual increase in its outstanding shares over the past 20 years—from 730,341,920 in 2003 to 982,420,000 today. Such a trend implies that Bayer may have periodically issued additional shares, which can affect earnings per share (EPS) and, potentially, the stock price. Nevertheless, in the most recent year, the stability in the number of shares indicates that there was no additional dilution, which can be seen as neutral to slightly positive.

Operating of Bayer (BAYN.DE)

Cross Margin is growing?

Change in Gross Margin compares the company's gross margin over the years to see if profitability from core activities is improving. An increase is favorable.

The Gross Margin for Bayer has decreased from 0.6084 in 2022 to 0.5854 in 2023, marking a decline rather than an increase. A lower gross margin indicates that a smaller portion of revenue is being converted into gross profit, which is typically a sign of reduced efficiency or cost management problems. Historically, Bayer's gross margins have fluctuated, peaking at 0.6749 in 2017 and hitting a low of 0.4107 in 2003. When compared to the industry median, Bayer's gross margins have consistently been lower, indicating competitive challenges in maintaining cost efficiency. Therefore, Bayer would not score any points in this criterion.

Asset Turnover Ratio is growing?

Change in Asset Turnover Ratio measures the efficiency of a company in using its assets to generate sales revenue. A higher ratio indicates better performance.

The Asset Turnover Ratio for Bayer (BAYN.DE) in 2022 was 0.414, and it decreased to 0.3951 in 2023. This marks a decline in the ratio, meaning that Bayer was less efficient in utilizing its assets to generate sales revenue compared to the previous year. Given long-term data reflecting a generally downward trend since the early 2000s, this is a concerning signal. The Asset Turnover Ratio did not increase in 2023; therefore, this criterion would not score any point (0 points). It's worth noting that the decrease aligns with a broader longer-term decline from its peak in 2004 at 0.7913.