Last update on 2024-06-06

Conagra Brands (CAG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyzing Conagra Brands' (CAG) 2023 Piotroski F-Score at 7/9, evaluating profitability, liquidity, and operational efficiency metrics.

Short Analysis - Piotroski Score: 7

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

The Piotroski F-Score is out of 9 and assesses companies based on 9 criteria of profitability, liquidity, and operating efficiency. Conagra Brands (CAG) scored 7, suggesting it's in a strong financial position. The company has positive net income and cash flow. Its Return on Assets (ROA) decreased while operating cash flow surpassed net income. Leverage has declined but the current ratio decreased. The number of outstanding shares decreased, gross margin increased, and asset turnover improved.

Insights for Value Investors Seeking Stable Income

Conagra Brands (CAG)'s Piotroski score of 7 indicates robust performance in several areas, especially profitability and operating efficiency. However, the declining current ratio and ROA are concerns. Despite these issues, the overall strong score suggests it could be a worthwhile investment. Investors should monitor its liquidity closely and possibly consider it as a medium-risk investment with the potential for stable returns.

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

Profitability of Conagra Brands (CAG)

Company has a positive net income?

Net income measures a company's total earnings or profit over a period of time. This metric is crucial as it provides an overview of a company's profitability, reflecting its financial health and operational efficiency.

As of 2023, Conagra Brands (CAG) reported a net income of $683.6 million. Since this figure is positive, it is added to the Piotroski F-Score, contributing 1 point. This indicates that Conagra Brands managed to remain profitable this year, which is beneficial for shareholders. Over the last 20 years, Conagra has seen fluctuations with some years exhibiting significant losses, notably in 2014 and 2015. However, for most of the period, the company reported positive net income, showcasing resilience and potential for long-term profitability.

Company has a positive cash flow?

This criterion evaluates whether the company is generating positive cash flow from its core business operations. Positive CFO indicates strong financial health and operational efficiency.

Conagra Brands (CAG) reported a Cash Flow from Operations (CFO) of $995.4 million in 2023. This figure is positive, which is favorable for the company. Over the last two decades, the CFO has varied significantly, ranging from a high of approximately $1.84 billion in 2020 to a low of about $124 million in 2009. The current year's CFO, although positive, shows a downward trend from highs in the past few years. This pattern could imply potential challenges in maintaining operational efficiency or revenue streams. Nonetheless, the positive figure for 2023 does add 1 point to the Piotroski score.

Return on Assets (ROA) are growing?

Return on Assets (ROA) signals how efficiently a company is using its assets to generate profits. An improving ROA can indicate better performance and management efficiency. When assessing a company's financial health, ROA is a critical marker because it illustrates the profits relative to the company's asset base.

The ROA for Conagra Brands has decreased from 0.0398 in 2022 to 0.0307 in 2023. This represents a troubling trend, as the decline suggests reduced efficiency in utilizing assets to generate profits. Despite industry fluctuations, such a drop is significant. Over the past 20 years, the company has occasionally been outperformed by the industry median, which was 0.2773 in 2022 and 0.282 in 2023. The reduction in Conagra’s ROA this year reverses some of the progress seen in previous years and is below the competitive benchmark. The company needs to investigate underlying issues and consider strategic adjustments to regain operational effectiveness in this metric. Hence, as per the Piotroski analysis criterion, no point is awarded since the ROA has not improved.

Operating Cashflow are higher than Netincome?

This criterion assesses whether operating cash flow exceeds net income, signaling better earnings quality.

For the fiscal year 2023, Conagra Brands (CAG) recorded an operating cash flow of $995.4 million compared to a net income of $683.6 million. The operating cash flow surpassing net income by $311.8 million implies robust earnings quality and suggests that the company's profits are supported by real cash flows as opposed to accounting adjustments or accruals. This is a positive sign, earning the company 1 point under this criterion. Historical data shows fluctuations, but generally operating cash flow has remained higher than net income in many of the past 20 years, further reinforcing this positive trend.

Liquidity of Conagra Brands (CAG)

Leverage is declining?

Change in Leverage measures the change in financial leverage of a company over a specified period. A decrease in leverage indicates improved financial health and a lower dependency on debt.

In comparison to 2022, Conagra Brands' leverage has indeed decreased from 0.3694 to 0.3296 in 2023. This 10.8% decline in leverage signifies an improvement in the company's financial health. Historically, we see fluctuations but the decreasing trend from 2020 demonstrates a recent focus on reducing debt dependency. Over the past 20 years, the leverage has shown significant variations, with notable increases around 2013 and 2019, but it has now stabilized around a comparatively lower level. Overall, 1 point is added for the positive improvement in leverage.

Current Ratio is growing?

Change in Current Ratio: It evaluates the liquidity of the company. A rising current ratio typically indicates improving liquidity and the ability to cover short-term liabilities. This is important because it speaks to the company's short-term financial health.

The Current Ratio of Conagra Brands has decreased from 0.8621 in 2022 to 0.7623 in 2023. This signifies a worrying trend in terms of liquidity, as it suggests the firm's capability to meet short-term obligations has declined. Further, if we look at the historical context since 2003, the current ratio has shown a general downward trend, with 2023 having one of the lowest ratios in the 20-year span. This decline is concerning, especially when contrasted against the industry median current ratio, which has remained relatively more stable and was 1.6315 in 2023, much higher than Conagra's. Therefore, as per the Piotroski Analysis, no point is assigned for this criterion due to the decrease in the current ratio.

Number of shares not diluted?

Change in Shares Outstanding evaluates whether a company is issuing more stock, potentially diluting existing shareholders' value. A decrease is considered favorable.

In 2023, Conagra Brands (CAG) reported 478.9 million outstanding shares compared to 480.3 million in 2022. This signifies a decrease in the number of outstanding shares, earning a point for favorable performance in this category. Historically, the trend shows periods of both increases and decreases, with significant efforts to reduce shares in years like 2008, when shares dropped from 530.7 million in 2007 to 489.8 million in 2008. The slight decrease from 2022 to 2023 suggests a strategic move to enhance shareholder value.

Operating of Conagra Brands (CAG)

Cross Margin is growing?

Gross Margin is calculated by subtracting the cost of goods sold (COGS) from total revenue and then dividing by the total revenue. It is vital because it indicates how efficiently a company is producing its goods. Higher Gross Margins suggest better efficiency and profitability.

In 2023, Conagra Brands reported a Gross Margin of 0.2659, which signifies an increase from 0.2461 in 2022. Hence, the criterion scores 1 point. This upward trend in Gross Margin is indicative of marginal improvements in production efficiency and cost control. Over the past 20 years, the Gross Margin has generally been below the industry median, which ranged between 0.2414 and 0.3134. Nevertheless, the positive trend in the latest fiscal year highlights a promising trajectory for Conagra Brands in bridging this gap.

Asset Turnover Ratio is growing?

Change in Asset Turnover, a measure of how efficiently a company uses its assets to generate sales, matters because it shows operational efficiency improvements.

The Asset Turnover for Conagra Brands (CAG) has increased from 0.5169 in 2022 to 0.5519 in 2023, indicating an improvement in the company's efficiency in utilizing its assets to generate revenue. An increase in asset turnover is generally a positive sign as it implies that the company is generating more sales per unit of asset owned. Given that the ratio has increased, we award this criterion 1 point. Additionally, the long-term asset turnover trend has been decreasing over the last 20 years, from a high of 1.2981 in 2003 to a low of 0.4966 in 2020, before it slightly picked up in 2022 and 2023. This long-term decline suggests broader challenges in maintaining asset efficiency over time, but the recent uptick may indicate a positive shift or successful strategic changes.