Last update on 2024-06-05

CF Industries Holdings (CF) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Explore CF Industries Holdings (CF) Piotroski F-Score for 2023, achieving 6/9. Insightful analysis on profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score evaluates a company's financial strength using 9 criteria focused on profitability, liquidity, and efficiency, where CF Industries Holdings (CF) scored 6 out of 9. The analysis revealed: - Positive indicators: CF has a positive net income, positive operating cash flow, cash flow exceeding net income, a growing current ratio, and decreased share count. These reflect profitability, good cash management, improved liquidity, and favorable equity structure. - Negative indicators: CF showed declining ROA, increased leverage, declining gross margin, and shrinking asset turnover, suggesting inefficiencies and rising financial risks. CF’s historical data highlight a strong cash flow and profit record, though recent trends in returns and asset use have been less favorable.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 6, CF Industries Holdings shows strengths in profitability and liquidity but has weaknesses in operational efficiency and financial leverage. Investors should consider looking into CF as it demonstrates solid profitability and cash generation. However, the declining efficiency in asset usage and increased leverage are concerning aspects that need close monitoring. Investors should weigh these factors before making investment decisions. It may be worth further research into how CF plans to address these inefficiencies and manage its growing debt.

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

Profitability of CF Industries Holdings (CF)

Company has a positive net income?

Net income is the total profit of a company after all expenses and taxes have been deducted. A positive net income is crucial

For CF Industries Holdings (CF), the net income for 2023 is $1,525,000,000, which is positive. According to the Piotroski analysis, a positive net income contributes 1 point. Evaluating the historical data of net income over the last 20 years reveals that CF Industries has had periods of both profit and loss, but it recently achieved positive net income consistently since 2015, except for 2016. This positive result is a good indicator of profitability and stable operational efficiency.

Company has a positive cash flow?

Check if CFO 2757000000 in 2023 are positive or negative. If the CFO is positive, add 1 point if not set it to 0.

CF Industries Holdings (CF) has reported a Cash Flow from Operations (CFO) of $2,757,000,000 for the year 2023, which is a positive figure. Therefore, this criterion adds 1 point in the Piotroski Analysis. When we look at the historical data over the last 20 years, we observe that CF's operating cash flow has shown consistent positive results, barring fluctuations. Notably, the figures reveal a significant growth trajectory over the two decades: - 2003: $140.52M - 2013: $1.47B - 2023: $2.757B This consistency in generating positive operating cash flow is indicative of strong operational efficiency and financial health. The increase from $140.52 million in 2003 to over $2.757 billion in 2023 shows that the company has managed to sustain and scale its operational capabilities effectively. These numbers foster confidence in CF's ability to generate cash internally, which is essential for its sustainability, investment capacity, and ability to withstand economic downturns.

Return on Assets (ROA) are growing?

ROA (Return on Assets) is a key indicator of how efficiently a company is utilizing its assets to generate profits. It is calculated by dividing the net income by total assets.

In 2022, CF Industries Holdings (CF) had a Return on Assets (ROA) of 0.2605, which fell to 0.1102 in 2023. This decline of more than 50% indicates a significantly decreased efficiency in asset utilization. Interestingly, examining the past 20 years, CF's highest ROA was significantly lower than the 20-year industry median ROA, which fluctuated around 0.3. In 2023, CF's ROA was substantially lower than the 2023 industry median of 0.3092. This downward trend is unfavorable and suggests potential issues in asset management or profitability at CF. Therefore, for Piotroski's analysis, CF Industries Holdings would score 0 on this criterion, indicating deterring operational performance compared to the previous year.

Operating Cashflow are higher than Netincome?

This criterion examines whether a company's operating cash flow exceeds its net income. It is vital because consistently having operating cash flow higher than net income indicates strong earnings quality and efficient cash management.

With an operating cash flow of $2.76 billion and a net income of $1.525 billion for CF Industries Holdings in 2023, the company earns a commendable 1 point for this criterion. The figures indicate a robust cash generation capacity, outpacing its accounting earnings. This discrepancy often signals the management’s competence in converting sales into actual cash, providing a sound basis for future operations and potential investments. When we gaze over the past two decades, it’s clear that CF Industries has consistently demonstrated ability in cash flow generation. Years like 2021 and 2022 show impressive figures of $2.87 billion and $3.86 billion in operating cash flow respectively, dwarfing net income figures of $917 million and $3.346 billion in those years. Even during less stellar years like 2016 and 2020, where net incomes were subdued or negative like in 2016 (-$277 million), the operating cash flows stayed relatively strong. The trend underscores a positive outlook for CF Industries, despite temporary hit in the bottom line, presaging resilience in the firm's operations.

Liquidity of CF Industries Holdings (CF)

Leverage is declining?

Change in Leverage is crucial as it indicates a company's ability to meet its long-term debt obligations. It reflects financial stability and risk levels.

The leverage ratio for CF Industries Holdings has increased from 0.2181 in 2023 compared to 0.2353 in 2022. This increase in leverage, illustrated by the values, implies that the company is taking on more debt relative to its equity, which can be seen in the context of past data: the leverage has fluctuated markedly over 20 years, with peaks such as 0.439 in 2015 and a low of 0 in 2008. Notably, the recent trend marks a reversal from a previously declining financial risk. This increase is seen as a negative trend under the Piotroski score, necessitating a 0 score for this criterion.

Current Ratio is growing?

The Change in Current Ratio measures a company's ability to pay short term and long term obligations.

The Current Ratio of CF Industries Holdings (CF) has increased from 3.6915 in 2022 to 3.8125 in 2023. This positive trend is favorable as it indicates that the company has improved its liquidity position, meaning it is better able to cover its short-term liabilities. Historically, CF's Current Ratio has shown significant fluctuations, but this increment matches the positive end above the industry's median Current Ratio of 1.8066 in 2023. With a ratio significantly higher than the industry median, it showcases strong liquidity compared to peers, which can be viewed favorably by investors and creditors. Thus, for this criterion, CF Industries Holdings earns 1 point.

Number of shares not diluted?

Share Outstanding measures the number of shares issued by a company and is important for evaluating equity structure and investor dilution.

In 2022, CF Industries Holdings had 203.3 million outstanding shares, which decreased to 193.3 million in 2023. This decreased by 10 million shares, indicating a share buyback or reduction program. Over the last 20 years, CF Industries has strategically reduced shares from 275 million in 2003. A decreased share count means fewer shares are dividing company earnings, potentially increasing Earnings Per Share (EPS) and often considered favorable by investors.

Operating of CF Industries Holdings (CF)

Cross Margin is growing?

Gross Margin measures a company's ability to generate revenue after the cost of goods sold is deducted. It is vital for assessing profitability and cost efficiency.

Finding that CF Industries Holdings (CF) had a Gross Margin of 0.3838 in 2023 compared to 0.524 in 2022, it is evident that the Gross Margin decreased. This is interesting to note considering the Gross Margin trends over the past two decades, ranging from a low of 0.0247 in 2003 to a peak of 0.524 in 2022. Despite outperforming the industry median Gross Margin of 0.3092 in 2023, CF's drop from 0.524 to 0.3838 indicates a reduction in its ability to retain revenue post cost-of-goods-sold. This decline likely warrants careful monitoring for potential cost management or pricing strategy adjustments. Therefore, this trend is bad for CF Industries and earns a score of 0 for this criterion.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales.

The asset turnover for CF Industries Holdings (CF) has decreased from 0.8709 in 2022 to 0.479 in 2023. This trend suggests a decline in efficiency in using assets to generate sales. Reviewing the last 20 years of asset turnover, there's been a fluctuating pattern with notable highs in the early 2000s. The current decline from 2022 weakens the company's operational efficiency, warranting a score of 0 for this criterion.