Last update on 2024-06-06

Boston Scientific (BSX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze Boston Scientific's (BSX) strong 2023 Piotroski F-Score of 7/9, showcasing robust profitability, improved cash flow, and liquidity metrics.

Short Analysis - Piotroski Score: 7

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

We evaluated Boston Scientific (BSX) using the Piotroski F-Score, a measure of financial strength that rates a company out of 9 points based on profitability, liquidity, and efficiency criteria. Boston Scientific (BSX) scored a 7, indicating strong financial health. Profitability looks good with positive net income ($1.593 billion in 2023) and growing operating cash flow ($2.503 billion in 2023). ROA is improving, showing better asset utilization, and operating cash flow surpasses net income, indicating high earnings quality. In terms of liquidity, the company's leverage is decreasing (lower financial risk), but the current ratio has slightly declined, meaning their ability to cover short-term liabilities has weakened. There has also been some dilution with shares outstanding increasing. Operationally, gross margin and asset turnover have increased, pointing to improved operational efficiency and profitability.

Insights for Value Investors Seeking Stable Income

Boston Scientific (BSX) seems to be in a strong financial position with a Piotroski score of 7 out of 9, suggesting it's a robust investment option. Profits and cash flow are increasing, and the company is improving its use of assets. Despite a slight decrease in the current ratio and an increase in shares outstanding, the overall stability and improvement in key areas make it worthwhile for investors to consider.

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

Profitability of Boston Scientific (BSX)

Company has a positive net income?

Net income is a fundamental indicator of profitability, showing whether a company is generating profit or incurring loss.

For Boston Scientific (BSX), the net income in 2023 stands at $1.593 billion, which is positive. This uptrend in net income from $698 million in 2022 to $1.593 billion in 2023 is commendable. Over the past 20 years, Boston Scientific has shown periods of both net losses and profits. The highest was $4.7 billion in 2019, while the lowest was a staggering loss of $4.068 billion in 2012. This year’s positive net income signifies a continued recovery and growth. The Piotroski score for net income here is 1 point.

Company has a positive cash flow?

Check if cash flow from operations (CFO) is positive or negative and add 1 point if positive and 0 if negative.

As of 2023, Boston Scientific (BSX) has a CFO of $2,503,000,000, which is positive and hence adds 1 point. Over the last 20 years, the company has experienced fluctuating CFO values, ranging from a low of $310,000,000 in 2018 to a high of $2,503,000,000 in 2023. It's evident that the company has significantly improved its operational cash flow in recent years, demonstrating a prosperous trend. This improvement in CFO is a positive indicator of the company's financial health.

Return on Assets (ROA) are growing?

ROA measures the efficiency with which a company can turn assets into profits. It is crucial for assessing operational efficiency in utilizing the company’s assets.

Boston Scientific's ROA increased from 0.0216 in 2022 to 0.0471 in 2023, indicating improved efficiency in utilizing assets. This improvement is a positive sign, particularly given the context of the company consistently generating substantial operating cash flow over the past two decades. While the healthcare industry's median ROA significantly outpaces Boston Scientific's figures, the upward trend in BSX’s ROA marks progress. This increase contributes 1 point to the Piotroski score, affirming a favorable trend in asset utilization.

Operating Cashflow are higher than Netincome?

This criterion assesses whether a company's operating cash flow is higher than its net income, indicating high earnings quality. This is crucial because high-quality earnings, signaled by strong cash flows, suggest the company’s ability to sustain operations and grow profitably.

In 2023, Boston Scientific's operating cash flow amounted to $2,503,000,000, comfortably surpassing its net income of $1,593,000,000. This positive trend suggests robust earnings quality, as the company generates ample cash from core operations beyond accounting profits. Reviewing historical data further, the company has often had varying trends, with its operating cash flow widely fluctuating over the years, peaking impressively in 2023. Given this substantial achievement amid such fluctuations, one can confidently assign 1 point for this criterion.

Liquidity of Boston Scientific (BSX)

Leverage is declining?

Change in leverage assesses a company's capital structure and its dependency on debt financing, which is crucial for understanding financial risk.

Boston Scientific's leverage ratio decreased from 0.2852 in 2022 to 0.255 in 2023. Historically, leverage has fluctuated with notable highs in 2015 (0.3129) and 2016 (0.2995). This 2023 decrease is encouraging and garners a score of 1 in the Piotroski Analysis, reflecting a reduction in financial risk. The multi-year trend denotes sound debt management.

Current Ratio is growing?

The current ratio assesses Boston Scientific's ability to cover short-term liabilities with short-term assets.

In comparing the current ratio of Boston Scientific (BSX) in 2023 (1.3205) with that of 2022 (1.5146), it is clear that the current ratio has decreased. Specifically, the ratio has dropped by 0.1941 units. This decline signifies a weakening ability to cover short-term liabilities with short-term assets over the period. For perspective, the historical data shows fluctuating current ratios with figures peaking in 2009 with 1.7183 and reaching a low in 2017 with 0.676, followed by a rebound hitting 1.8185 in 2020. Compared to the industry median current ratio, which remains much higher at 4.0615 in 2023, it indicates that Boston Scientific's liquidity is notably lower than the general market trend. Given the decrease from 2022 to 2023 and against the context of industry standards, no point is added under the Piotroski criteria for the current ratio assessment.

Number of shares not diluted?

Change in shares outstanding is evaluated by comparing the number of shares from one year to the next. A decrease in shares is typically favorable as it indicates share buybacks, which can boost the stock's value.

In 2023, Boston Scientific (BSX) had 1,453,000,0000 outstanding shares, an increase from 2022's 1,430,500,0000 shares. This represents a year-over-year increase in outstanding shares by 22.5 million shares. This upward trend suggests no active share buyback initiative from the company, earning it 0 points in this criterion of the Piotroski score. Historically, Boston Scientific's shares have generally followed an ascending trend over the past 20 years, especially significant since around 2004, with the most substantial increase emerging during 2006. This consistent rise suggests that the company may prefer equity financing over buybacks, potentially diluting shareholder value.

Operating of Boston Scientific (BSX)

Cross Margin is growing?

This criterion assesses the company's operational efficiency and profitability by comparing its gross margin year over year.

Comparing the years 2023 and 2022, Boston Scientific (BSX) experienced an increase in Gross Margin from 0.6881 in 2022 to 0.6949 in 2023. This 0.68 percentage point rise is a positive indicator and qualifies for adding 1 point according to the Piotroski F-Score framework. To provide further context, the company has generally maintained Gross Margins close to or above the industry median over the past 20 years, averaging significantly higher margins than the industry in several years. This sustained performance indicates robust cost management and pricing power, reinforcing Boston Scientific's favorable position in the market and justifying the positive trend observed this year.

Asset Turnover Ratio is growing?

Asset turnover measures how efficiently a company uses its assets to generate sales.

For Boston Scientific (BSX), the Asset Turnover increased from 0.392 in 2022 to 0.4213 in 2023. This is a positive trend and indicates improved efficiency in using assets to generate sales. This increase adds 1 point in the Piotroski analysis. Analyzing the historical data over the past 20 years, the asset turnover shows significant variability but an overall gradual improvement since the dip around 2007 to 2010. The highest turnover was 0.811 in 2004 and the lowest was 0.2683 in 2007. The recent improvement reflects a favorable trend towards better asset utilization.