Last update on 2024-06-07

Central Garden & Pet (CENT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Review Central Garden & Pet (CENT) Piotroski F-Score analysis for 2023 with a score of 6/9. Key details on profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 6

We're running Central Garden & Pet (CENT) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score for Central Garden & Pet (CENT) is 6 out of 9, indicating a moderate financial health. The score is derived from a positive net income and strong cash flows, which signal profitability and high earnings quality. Liquidity measures are also favorable with decreasing leverage and an increasing current ratio. However, declining Return on Assets (ROA) and asset turnover rates highlight inefficiencies, and while the company shows strong elements, there are areas that need improvement. Gross margin has slightly dropped, indicating possible issues with cost control or pricing power.

Insights for Value Investors Seeking Stable Income

Given the Piotroski Score of 6, Central Garden & Pet (CENT) appears to be a moderately strong investment, particularly with positive cash flows, net income, and liquidity metrics. However, watch out for the declining ROA and asset turnover, which suggest potential inefficiencies. This stock could be a good addition if balanced with other strong performers, but it's important to keep an eye on areas needing improvement. Consider conducting further due diligence before making a final decision.

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

Profitability of Central Garden & Pet (CENT)

Company has a positive net income?

Net income refers to a company's total earnings or profit and is a key indicator of financial health.

The net income of Central Garden & Pet (CENT) stands at $125,643,000 for 2023, which is positive. Over the past 20 years, the net income trend has shown volatility with some significant lows, notably in 2008 with a net loss of $267,335,000. However, in the recent decade, the company has generally reported positive net income, with a peak in 2021 at $152,152,000. Given the positive net income for 2023, CENT will earn 1 point in the Piotroski analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) examines the cash generated or used by a company's core business operations.

Central Garden & Pet's CFO for 2023 stands at $381,634,000, which is notably positive. Historically, the firm has exhibited fluctuations in operating cash flow over the last two decades, including negative figures in 2010 and 2022. Nonetheless, the significant positive flow in 2023 marks a favorable trend. A positive CFO indicates effective operational management and generates investor confidence. Therefore, this criterion scores 1 point.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures whether the company's efficiency in generating profit from its assets has improved year-over-year.

For Central Garden & Pet (CENT), the Return on Assets (ROA) has decreased from 0.0476 in 2022 to 0.0377 in 2023. This decline indicates that the company has become less efficient at converting its assets into net income. Comparing this to the historical trend, the ROA in 2022 was already significantly lower than the industry median of 0.2773. With 2023 showing a further decline, this suggests an ongoing struggle for CENT to elevate its profitability to match or exceed industry norms. Moreover, while historical operating cash flow indicates periods of volatility, the steady decline in ROA underscores a potential area of concern for investors.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income measures the quality of earnings. Higher cash flow means earnings are backed by cash.

For the fiscal year 2023, Central Garden & Pet (CENT) reported an Operating Cash Flow of $381,634,000 alongside a Net Income of $125,643,000. Clearly, the Operating Cash Flow is significantly higher than the Net Income. This indicates a score of 1 in this Piotroski criterion, suggesting that CENT's earnings are of high quality and backed by solid cash flow, which is encouraging. Over the past 20 years, operating cash flows demonstrate volatility but have markedly improved, especially in 2023, hitting the highest in this period.

Liquidity of Central Garden & Pet (CENT)

Leverage is declining?

Change in Leverage compares the company's financial leverage over time, crucial for evaluating debt management.

The Leverage has increased from 0.4065 in 2022 to 0.3918 in 2023. This is a good trend, as a decreasing leverage ratio suggests a company is using less debt to finance its assets, which may indicate stronger financial health.

Current Ratio is growing?

Current Ratio indicates a company's ability to pay short-term liabilities with short-term assets.

For Central Garden & Pet (CENT), the Current Ratio for 2023 stands at 3.7274, evidencing a rise from the 3.3352 recorded in 2022. This improvement is a positive indicator, suggesting enhanced liquidity and a stronger capacity to settle short-term liabilities with short-term assets. Comparing this to the industry's median current ratio, which has typically hovered around 1.8, Central Garden & Pet significantly outperforms its peers, maintaining a robust liquidity position over the last two decades. Given this notable increase in 2023, the criterion is fulfilled successfully, warranting a full point for this metric.

Number of shares not diluted?

Change in shares outstanding examines whether a company has issued more shares to the market, which can dilute existing shareholders' equity. A decrease in shares outstanding is often considered favorable.

In 2022, Central Garden & Pet had 66,525,000 outstanding shares, which decreased to 65,493,750 in 2023. This reduction in outstanding shares is favorable as it suggests that the company may have repurchased shares, indicating confidence in its value and potentially enhancing shareholder value. Over the past 20 years, the number of shares has fluctuated significantly with peaks and troughs, but the recent decrease earns the company a point for this criterion.

Operating of Central Garden & Pet (CENT)

Cross Margin is growing?

The change in gross margin criterion evaluates whether a company's gross margin has improved compared to the previous year. An increasing margin is a positive indicator of cost control and pricing power.

In 2023, Central Garden & Pet's (CENT) gross margin was 0.286, down from 0.2972 in 2022. This decrease indicates a slight deterioration in cost efficiency or pricing capabilities, suggesting the company had either higher production costs or lowered pricing power. Observing the last 20 years, CENT's gross margin historically fluctuates but has generally remained above the industry median, except this year when both saw a dip. Given the lower gross margin in 2023, this criterion scores 0 points.

Asset Turnover Ratio is growing?

Asset Turnover is a financial ratio that measures the efficiency of a company's use of its assets to generate revenue. A high ratio implies efficient asset use.

In 2023, Central Garden & Pet (CENT) had an asset turnover ratio of 0.9939, down from 1.0435 in 2022. The decrease indicates a decline in the efficiency with which the company is utilizing its assets to generate revenue, which is not favorable. Over the last two decades, the asset turnover has fluctuated significantly but has been on a general downtrend since 2017, when it peaked at 1.6311.