Last update on 2024-06-06

CDW (CDW) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Assess CDW's financial health in 2023 with a Piotroski F-Score of 6/9, covering net income, cash flow, profitability, and more. Discover the detailed analysis.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score is a measure (0-9) of a company's financial strength. CDW Corporation scored 6 out of 9, indicating a relatively strong position. We checked profitability, liquidity, and operating efficiency factors:positive net income and cash flow, high operating cash flow over net income, reduced leverage, and share buybacks. But, stable to declining ROA, a reducing current ratio, and a poor asset turnover brought down the score. Overall, CDW shows good financial health but has room to improve its asset use efficiency.

Insights for Value Investors Seeking Stable Income

CDW's Piotroski F-Score of 6 suggests it is relatively financially strong and has been making positive strides in profitability and reducing debt. The company has solid metrics in net income, cash flow, and leverage reduction, and share buybacks. However, its declining asset turnover and current ratio suggest some operational area improvements are needed. If you are an investor looking for stocks, CDW appears promising for its stability and potential for growth, but be aware of its lag in efficiently using assets and its liquidity.

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

Profitability of CDW (CDW)

Company has a positive net income?

Net income is a fundamental measure of a company's profitability. A positive net income indicates that the company is profitable, whereas a negative net income shows a net loss. This criterion is crucial because consistent profits are essential for a company's long-term sustainability and growth. Positive net income is a sign of financial health and performance.

For CDW (CDW), the net income for 2023 stands at $1,104,300,000 which is positive, thus adding 1 point to the Piotroski score. The last 20 years' net income data provides a clear trend. Over the period from 2003 to 2023, CDW experienced a few years of losses such as in 2007, 2008 and 2009. However, from 2010 onwards, CDW has shown consistent yearly profits with a significant upward trend in net income, peaking in recent years. Notably, net income peaked at approximately $1,114,500,000 in 2022, slightly higher than in 2023. This consistent profitability over the last decade bolsters the company’s financial foundation and indicates good potential for continued performance.

Company has a positive cash flow?

This criterion checks whether a company's cash flow from operations (CFO) is positive. Positive CFO indicates that a company is generating sufficient cash from its core business operations, which is crucial for sustainability and growth.

For 2023, CDW reported a cash flow from operations (CFO) of $1,598,700,000. This figure is indeed positive. Notably, the trend over the past 20 years shows a consistent increase in CFO, save for a few years such as 2007 with $0 CFO. This suggests a robust and growing ability of CDW to generate cash from its core operations over time. Hence, for this criterion, CDW earns 1 point. This is indicative of strong operational efficiency and financial health, essential for both short-term liquidity and long-term investment potential.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is a critical criterion because it indicates how efficiently a company is utilizing its assets to generate profit. An increasing ROA is a positive signal for investors.

In 2023, CDW (CDW) recorded an ROA of 0.0836, compared to 0.0847 in 2022. This represents a slight decrease rather than an increase in ROA, resulting in a score of 0 for this Piotroski criterion. Although CDW's ROA remains stable, it is still moderate when compared to the industry's median ROA for 2023, which is 0.3391. This indicates that CDW lags behind its industry peers in terms of asset utilization effectiveness. Historical trends show fluctuations in the company's operating cash flow, but this has not translated into a consistent upward trajectory in ROA. Since a rising ROA would have been a more favorable indicator of improved financial health, the static or declining ROA may warrant further scrutiny into the company's operational efficiencies and asset management strategies.

Operating Cashflow are higher than Netincome?

This criterion compares the operating cash flow (OCF) to the net income, awarding 1 point if OCF is higher, otherwise 0. It indicates whether a company’s earnings are supported by cash flow, a sign of financial health.

In 2023, CDW's operating cash flow stood at $1.5987 billion, while its net income was $1.1043 billion. Since the OCF is higher than the net income, CDW earns 1 point for this criterion. This trend is positive as it suggests that CDW's earnings are backed by real cash flow and not just accounting profits. For instance, in 2021 CDW exhibited an OCF of $1.3359 billion against a net income of $1.1145 billion, signifying consistent performance. Historically, CDW has shown robust operating cash flows even outpacing net income, except in some challenging periods mid-2000s and post-2008 financial crisis. Improved OCF relative to net income suggests financial stability and potentially better liquidity, reassuring investors about the reliability of earnings.

Liquidity of CDW (CDW)

Leverage is declining?

Change in Leverage measures a company's ability to reduce its levels of debt and improve its financial stability. Decreasing leverage is considered a positive indicator of financial strength.

In 2022, CDW's leverage stood at 0.4601. By 2023, the leverage decreased to 0.3911. This downward trend is a robust indicator that the company has been effective in reducing its debt levels. Decreasing leverage from 0.4601 to 0.3911 over the year is a positive sign and earns a score of 1 in the Piotroski analysis. Over the last 20 years, the company's leverage has generally shown a fluctuating but overall reducing trend from highs like 0.7696 in 2009 to the current low of 0.3911 in 2023. This consistent reduction bolsters CDW's financial stability and potential for long-term solvency.

Current Ratio is growing?

The current ratio is a key liquidity metric that compares a company's current assets to its current liabilities. It provides insight into the short-term financial health of a firm. A higher current ratio indicates a better ability to cover short-term obligations.

The Current Ratio for CDW (CDW) has decreased to 1.2321 in 2023 from 1.3268 in 2022. This represents a decline which is generally negative as it may indicate a reduced capability of CDW to cover its short-term liabilities with its short-term assets. Additionally, the company's current ratio remains below the industry median of 1.4169 for the same year, signaling potential liquidity concerns. Over the last 20 years, this drop appears consistent with past fluctuations, though not a favorable shift in terms of liquidity. As a result, this does not add a point.

Number of shares not diluted?

This criterion examines the year-over-year change in shares outstanding. A decrease in shares outstanding indicates that the company is buying back shares, which can be positive as it potentially enhances earnings per share and shows management's confidence in the business.

The shares outstanding for CDW decreased from 135,200,000 in 2022 to 134,600,000 in 2023, indicating a reduction of 600,000 shares. Over the last 20 years, CDW has fluctuated in its number of outstanding shares, peaking at 172,800,000 in 2014 but generally trending downward since then. This recent decrease is a positive sign, suggesting a share buyback strategy that may benefit shareholders. Hence, one point is added in Piotroski Analysis.

Operating of CDW (CDW)

Cross Margin is growing?

Explain the criterion for CDW (CDW) and why it is important to consider

Gross Margin tells us how efficiently a company is producing goods and services compared to its peers. An increasing Gross Margin is generally positive as it suggests better cost management or pricing power. Comparing the latest two years, CDW's Gross Margin has risen from 0.1973 in 2022 to 0.2176 in 2023. As a result, 1 point is awarded for the increase in Gross Margin. Historical data shows an upward trend from as low as 0.1444 in 2003. Industry comparisons indicate that while CDW's Gross Margin has improved, it remains below the industry median of 0.3391 in 2023.

Asset Turnover Ratio is growing?

Asset Turnover measures how efficiently a company uses its assets to generate sales. Higher ratios typically indicate better performance.

With an Asset Turnover of 1.6184 in 2023 compared to 1.8039 in 2022, CDW's asset utilization has worsened. The declining trend indicates less efficiency in using its assets to produce sales. Notably, over the last 20 years, the ratio peaked in 2004 at 4.0513 and has generally trended downward since. This drop gives CDW 0 points for the Piotroski criterion.