Last update on 2024-06-04

Brenntag (BNR.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Piotroski F-Score analysis of Brenntag (BNR.DE) for 2023 reveals a score of 6/9, covering profitability, liquidity, and operational efficiency insights.

Short Analysis - Piotroski Score: 6

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

Brenntag (BNR.DE) earned a Piotroski F-Score of 6 out of 9, indicating fairly strong financial health. The company has strong profitability, demonstrated by a high net income and positive operating cash flow. However, the ROA has decreased, showing a slight reduction in operational efficiency recently. Brenntag also shows positive indicators in liquidity with declining leverage, but a weakening current ratio needs attention. From an operations standpoint, Brenntag has an improving gross margin but a falling asset turnover ratio, signaling hurdles in asset usage efficiency. Overall, Brenntag reflects a stable but slightly shaky financial standing in certain operational areas.

Insights for Value Investors Seeking Stable Income

Brenntag (BNR.DE) demonstrates a solid financial position with a Piotroski Score of 6, making it worth looking into for investment purposes. The company has solid profitability and cash flow generation capabilities, supported by positive income and cash flow trends. However, potential investors should be wary of the declining ROA and current ratio, which suggest minor efficiency and liquidity issues. To strengthen the decision, investigating these aspects further and monitoring future performance trends is recommended.

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

Profitability of Brenntag (BNR.DE)

Company has a positive net income?

Positive net income is a key indicator of a company's profitability and overall financial health.

Brenntag's net income for 2023 is €714,900,000, marking a positive figure. This net income is lower compared to the previous year (2022), which was €886,800,000—a decrease of approximately 19%. However, looking at the historical data over the last 20 years, Brenntag has consistently improved its net income, particularly from 2010 onwards, reflecting a robust trend. Despite the dip from last year, the 2023 figure substantively remains in the high positive spectrum, indicating continued strong profitability. Therefore, Brenntag scores 1 point for positive net income for the year 2023.

Company has a positive cash flow?

Check if the CFO is positive. If positive, it indicates the company is generating sufficient operational cash; otherwise, it's losing operational cash.

With a CFO of €1,663,900,000 in 2023, Brenntag clearly demonstrates strong cash-generating prowess from its core operations. This positive figure is vital as it signifies the company’s effective ability to transform its revenues into actual cash flow, a fundamental aspect for sustaining growth, capital expenditures, and shareholder returns. Historical data over the past 20 years shows a positive and generally upward trend in operating cash flow, especially noticeable over recent years, with substantial jumps in 2020 (€1.22 billion), 2022 (€956.7 million), and the exceptional spike in 2023. This consistent performance in CFO cements Brenntag's ability to generate cash efficiently, scoring a full point on this Piotroski criterion and presenting a robust financial health outlook.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures how efficiently a company uses its assets to generate profit. Higher ROA indicates better operational efficiency.

Brenntag's ROA decreased from 0.0822 in 2022 to 0.0659 in 2023, indicating a reduction in operational efficiency. Hence, the criterion point is set to 0. Notably, Brenntag’s operating cash flow has shown a significant trajectory increase, especially in 2023, reflecting operational improvements. Yet, competing against consistent industry median ROA values, Brenntag underperformed in terms of asset utilization by comparison.

Operating Cashflow are higher than Netincome?

Assessing whether the Operating Cash Flow is higher than the Net Income is crucial as it indicates the business's capability to generate sufficient cash flow from its operations, without relying on other sources like financing or investing.

For Brenntag (BNR.DE) in 2023, the Operating Cash Flow stands at €1.6639 billion, significantly surpassing the Net Income of €714.9 million. This earns Brenntag 1 point under the Piotroski F-Score criterion. High operating cash flow compared to net income suggests good earnings quality and effective cash management. Over the past 20 years, Brenntag's operating cash flow frequently exceeded net income, showcasing a robust business model. Notably, 2023 registers the highest operating cash flow in two decades, reinforcing the positive trend. This upward trajectory in operating cash flow is a strong indicator of financial health and operational efficiency.

Liquidity of Brenntag (BNR.DE)

Leverage is declining?

Change in leverage assesses how a company's debt levels have evolved relative to its equity, reflecting risk management effectiveness.

Evaluating Brenntag's leverage between 2022 and 2023, a marginal reduction from 0.2276 to 0.205 (approximately 2.25% decreased leverage) is evident. This decrease signals Brenntag's strategic move towards a more conservative financial structure, prioritizing stability. This decrement contrasts with the historical trend, as seen with varying leverage levels over the last two decades. Notably, peaks in leverage, such as 2015’s 0.2987, were followed by measured reductions, indicative of proactive risk adjustments. Thus, this latest decrease is a positive trend under the Piotroski scoring model, meriting a 1-point increment for decreased leverage in 2023.

Current Ratio is growing?

The Current Ratio measures a company’s ability to pay off its short-term liabilities with its short-term assets. An increasing Current Ratio indicates better short-term financial health.

Brenntag’s Current Ratio decreased from 1.8284 in 2022 to 1.5268 in 2023, which is below the industry median of 1.9399. This is concerning as it suggests that Brenntag's liquidity position has weakened, reducing by approximately 16.5%. Given this substantial decline, the Current Ratio criterion scores 0 points. This calls for a closer look at the company's short-term liabilities and asset management strategies.

Number of shares not diluted?

Assess whether the change in outstanding shares over the past year indicates shareholder dilution or concentration.

The outstanding shares decreased from 154,500,000 in 2022 to 151,100,000 in 2023, indicating share repurchase activity or a reverse stock split. With a drop, we assign a score of 1 for this criterion. Historically, shares have remained stable at 154,500,000 from 2012 to 2022, making this change notable. Shrinking outstanding shares usually implies rising EPS (Earnings Per Share), benefiting the existing shareholders.

Operating of Brenntag (BNR.DE)

Cross Margin is growing?

The change in Gross Margin evaluates whether the company's efficiency in generating profit from sales has improved or worsened over the period.

The Gross Margin for Brenntag (BNR.DE) was 0.2223 in 2022 and increased to 0.2391 in 2023. This represents a growth in Gross Margin, signalling an improvement in the company's ability to convert revenue into gross profit. Adding a point here, we observe an upward trend, which is favourably aligned with previous performance except 2020 and 2021. Despite having a Gross Margin below the industry median of 0.3018 in 2023, this growth remains a positive indicator for Brenntag, indicating better cost control and pricing strategies.

Asset Turnover Ratio is growing?

Asset Turnover indicates how efficiently a company uses its assets to generate sales. It's vital for understanding operational efficiency.

The Asset Turnover for Brenntag decreased from 1.8016 in 2022 to 1.549 in 2023, resulting in a score of 0 for this Piotroski criterion. Historically, Brenntag's Asset Turnover has varied, peaking in recent years, but the decline in 2023 suggests a potential inefficiency or strategic shift. For instance, the ratio was at its lowest in 2020 at 1.4119, highlighting variability influenced by market conditions or operational changes.