Last update on 2024-06-05

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

Comprehensive Piotroski F-Score analysis of Danone (BSN.DE) for 2023 with a score of 6/9. Detailed insights into profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score is a measure from 0 to 9 that gauges the strength of a company's financial situation. It's based on 9 criteria related to profitability, liquidity, and operational efficiency. Danone (BSN.DE) has a Piotroski score of 6 out of 9. Let's break down the details: **Profitability:** Danone showed solid profitability with a positive net income of €881 million and positive cash flow from operations standing at €3.442 billion. However, its Return on Assets (ROA) decreased slightly, marking an area of concern. **Liquidity:** Danone managed to generate higher operating cash flow compared to net income, which is a positive indicator. However, its leverage slightly increased and its current ratio decreased, pointing towards potential liquidity issues. Additionally, the number of outstanding shares increased, potentially diluting shareholder value. **Operational Efficiency:** The company's gross margin improved from 0.4605 to 0.4737, indicating better cost management. Furthermore, the asset turnover ratio increased slightly, showing increased efficiency in using assets to generate revenue.

Insights for Value Investors Seeking Stable Income

Danone (BSN.DE) has a moderately strong Piotroski F-Score of 6, showing a generally positive outlook but with certain areas needing attention. For investors, this makes Danone a stock worth considering, especially for those who value a consistent track record of profitability and operational efficiency. However, investors should remain cautious about its slight increase in leverage, declining current ratio, and the potential dilution of shares. It would be beneficial to monitor these areas closely to ensure they do not negatively impact future performance. Overall, Danone presents a promising, although not flawless, investment opportunity.

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

Profitability of Danone (BSN.DE)

Company has a positive net income?

This criterion assesses whether a company is profitable. A positive net income indicates financial stability.

For the year 2023, Danone (BSN.DE) reported a net income of €881 million, which is indeed positive. Over the past 20 years, Danone has generally exhibited robust profitability, hitting a peak net income of €4.18 billion in 2007. Despite some fluctuations, including a significant dip in 2022 to €959 million, the company has maintained positive net income figures, demonstrating a persistent ability to generate profits. Thus, for this criterion, Danone earns 1 point for 2023.

Company has a positive cash flow?

A positive Cash Flow from Operations (CFO) indicates a company's ability to generate sufficient cash to maintain and grow its operations, which is crucial for sustainability.

For Danone (BSN.DE), the CFO for the year 2023 stands at €3,442,000,000. This figure is positive, thus adding 1 point on the Piotroski scale. Over the last 20 years, CFO has generally trended upwards, although there have been fluctuations. For instance, in 2013, the CFO stood at €2,356,000,000 and experienced some dips, but it has broadly risen to the current level. This positive and consistently growing CFO is good for Danone as it shows financial health and operational stability.

Return on Assets (ROA) are growing?

Annual return on assets (ROA) indicates how profitable a company is relative to its total assets. A rising ROA suggests efficient use of assets.

For Danone (BSN.DE), the return on assets (ROA) declined from 0.0211 in 2022 to 0.0196 in 2023. This indicates a slight decrease in the company's ability to generate profit from its asset base. While this change is relatively minor, it still affects the overall efficiency metric negatively, warranted a score of 0 for this criterion. Examining trends further, we can see this is below the industry median ROA of 0.282 in 2023, highlighting a competitive disadvantage that Danone may face within its industry. Though Danone has demonstrated stable operating cash flows over the last 20 years (most recently at 3,442,000,000 in 2023), a consistent trend towards higher asset profitability is essential for boosting investor confidence and achieving superior market performance.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a criterion that assesses a company's financial health.

The Operating Cash Flow for Danone in 2023 is €3,442,000,000 while the Net Income is €881,000,000. Since the Operating Cash Flow is significantly higher than the Net Income, this criterion is met, adding 1 point to Danone's Piotroski score. This trend indicates that the company generates cash from its primary business more efficiently than its reported earnings suggest. Over the last 20 years, Danone's Operating Cash Flow has generally been higher than its Net Income, which suggests good cash flow management. This is particularly important as it implies that Danone has good liquidity and lesser reliance on accruals, which are more susceptible to accounting manipulation.

Liquidity of Danone (BSN.DE)

Leverage is declining?

Change in Leverage analyzes the variation of financial leverage between two periods, reflecting a company's dependence on borrowed funds. A decrease in leverage indicates improved financial stability.

The leverage ratio for Danone has slightly increased from 0.2386 in 2022 to 0.2348 in 2023. With this increase, Danone fails to add a point for this criterion. Over the last 20 years, Danone's leverage has fluctuated notably. The lowest leverage was 0.1247 in 2011, while the highest was 0.4256 during 2008. Given the steadying trend since 2018, maintaining leverage close to 0.2348, this uptick is minor but does suggest slightly increased financial risk. While not alarming, it warrants monitoring for future stability. Thus, a score of 0 is justified based on leverage changes.

Current Ratio is growing?

The Current Ratio indicates a company's ability to pay off its short-term liabilities with its short-term assets. An increasing ratio suggests improving liquidity.

The Current Ratio for Danone (BSN.DE) has decreased from 1.0019 in 2022 to 0.934 in 2023. This shift represents a decrease in liquidity, which can be concerning for investors. It indicates that Danone now has less capacity to cover its short-term liabilities with short-term assets. This is particularly notable when compared to the industry median Current Ratio of 1.6315 in 2023, signaling that Danone is significantly below the industry standard. Over the past 20 years, Danone's Current Ratio has shown considerable variability, peaking at 2.1119 in 2016 and presently declining. This downward trend and the current ratio below 1 suggests financial weaknesses in terms of liquidity. Therefore, this criterion does not add a point in the Piotroski analysis.

Number of shares not diluted?

Changes in shares outstanding involve evaluating whether the number of shares issued by a company has increased or decreased over a period. It is important to measure because an increased number of outstanding shares may dilute existing shareholders' equity, whereas a decrease might indicate a share buyback program that can enhance shareholder value.

In 2022, Danone had 639,050,821 outstanding shares. In 2023, this number increased to 641,030,818. This increase suggests that the company has potentially issued more shares, which could lead to share dilution for existing shareholders. Given the Piotroski scoring system's guideline, an increase in outstanding shares results in a score of 0. Historically, examining the data over the past 20 years shows that Danone's outstanding shares have generally increased, barring some years of stabilization or minimal reduction. The last significant reduction was in 2008, followed by an overall upward trend. Therefore, for 2023, the criteria are met negatively with a score of 0, suggesting diminished shareholder value on this front.

Operating of Danone (BSN.DE)

Cross Margin is growing?

Gross margin represents a company's ability to manage its production costs and is crucial for profitability.

Danone has exhibited an upward trend in its Gross Margin, climbing from 0.4605 in 2022 to 0.4737 in 2023. This increase is noteworthy, especially considering that the Gross Margin in 2022 was already on the higher end compared to the last two decades, where the average hovered in the lower 0.5s. This positive trend is a strong indicator of improved operational efficiency and better cost control. It's worth mentioning that Danone has consistently outperformed the industry median, which stands at 0.282 in 2023. Historically, the company's Gross Margin was as high as 0.5495 in 2009; thus, there's room for further improvement. Overall, the increasing Gross Margin in 2023 signifies robust financial health, earning Danone one point in the Piotroski Analysis for this criterion.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets to generate sales revenue and is a critical indicator of operational efficiency.

In 2023, Danone (BSN.DE) report an Asset Turnover ratio of 0.6153, up from 0.6099 in 2022. This slight improvement indicates increased efficiency in utilizing assets to generate revenue, resulting in a 1 point positive score in the Piotroski F-Score evaluation. Over the last two decades, Danone’s Asset Turnover ratio has fluctuated, hitting a low of 0.392 in 2008 and showing a marked overall improvement since then. This trend demonstrates Danone's ongoing efforts to optimize asset usage efficiently, which is a positive signal for stakeholders.