Last update on 2024-06-05

Colgate-Palmolive (CL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Colgate-Palmolive (CL) achieves an impressive Piotroski F-Score of 8/9 in 2023, showcasing strong financial health and operational efficiency.

Short Analysis - Piotroski Score: 8

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

The Piotroski F-Score is a rating from 0 to 9 that shows how strong a company's financial health is. Colgate-Palmolive (CL) has a high Piotroski Score of 8, meaning it's very strong in terms of its financial position. The score is based on nine different measures including profitability, liquidity, and efficiency. For profitability, CL has a positive net income and increasing cash flows, marked by historic consistency. Liquidity-wise, the company has faced some issues with increasing leverage and a declining current ratio. Regarding operational efficiency, they've shown improvements in gross margin and asset turnover, while also managing to reduce their outstanding shares through buybacks.

Insights for Value Investors Seeking Stable Income

Given the strong Piotroski F-Score of 8, Colgate-Palmolive appears to be a robust and potentially undervalued investment. The company demonstrates consistent profitability, efficient operations, and a commitment to returning value to shareholders through share buybacks. However, the increasing leverage and declining current ratio are points to be cautious about. Overall, it’s worth considering for investment due to its strong financial performance and profitable growth trends, but keep an eye on their ability to manage liabilities.

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

Profitability of Colgate-Palmolive (CL)

Company has a positive net income?

Net income gauges a company's profitability after accounting for all expenses and taxes. Positive net income denotes a company's capacity to generate profit, a fundamental criterion.

Given a net income of $2.3 billion in 2023, Colgate-Palmolive (CL) records a positive net income, thereby scoring 1 point on this criterion. Historically, the company has consistently maintained positive net income over the past 20 years, indicating resilient financial performance. This trend underscores the company's strong profitability and efficient management, essential for investor confidence.

Company has a positive cash flow?

Cash Flow from Operations (CFO) assesses a company's ability to generate sufficient cash flow to maintain operations and grow the business.

In 2023, Colgate-Palmolive's Cash Flow from Operations (CFO) stands at $3.745 billion, indicating a positive trend in operational efficiency. A positive CFO allows the company to invest in growth, pay down debt, and return capital to shareholders without relying on external financing. Over the past 20 years, the CFO has displayed robustness, fluctuating but generally increasing, which speaks to the company's sustained operational health. Key years like 2023 ($3.745B) and 2020 ($3.719B) mark standout performance, with only a few years like 2022 ($2.556B) indicating substantial dips. Overall, the presence of a consistently positive CFO earns Colgate-Palmolive 1 point in the Piotroski Analysis, reflecting its stable operating fundamentals.

Return on Assets (ROA) are growing?

The criterion examines the improvement in Return on Assets (ROA) year-over-year. It is important to consider because it indicates a company's efficiency in generating profit from its assets.

The ROA for Colgate-Palmolive increased from 0.116 in 2022 to 0.1432 in 2023. This 2.72 percentage point improvement is a positive trend, showing that the company has become more efficient in generating profits from its assets. Over the past 20 years, Colgate-Palmolive has shown varied performance in ROA, and this current trend aligns well with an upward momentum. Comparatively, while the industry median ROA stands at 0.4411 in 2023, indicating Colgate-Palmolive lags behind the median, the improvement within the company is still a favorable sign. This consistency in upward movement adds 1 point in the Piotroski Score for this criterion.

Operating Cashflow are higher than Netincome?

The Operating Cash Flow (OCF) indicates the amount of cash generated by a company's regular operating activities. Comparing OCF to Net Income shows the quality of earnings.

For Colgate-Palmolive (CL) in 2023, the Operating Cash Flow is $3.745 billion, while the Net Income is $2.3 billion. As the OCF is higher, this indicates robust earnings quality, adding 1 point to the Piotroski Score. Over the past 20 years, OCF typically exceeds Net Income, suggesting consistent cash generation from core activities, crucial for assessing financial health.

Liquidity of Colgate-Palmolive (CL)

Leverage is declining?

Change in Leverage evaluates whether a company's financial leverage has increased or decreased. Financial leverage is vital because it impacts a firm's risk and return.

For Colgate-Palmolive (CL), the company's leverage increased from 0.527 in 2023 to 0.5809 in 2022. Hence, the Leverage for the year 2023 has increased. Historically, the leverage has ranged from 0.2534 to 0.5809 over the last 20 years, indicating a significant variability. The recent increase could be perceived as less favorable because higher leverage often signifies higher financial risk. This trend results in a score of 0 for this criterion.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term obligations with its current assets. A higher ratio indicates better liquidity and financial health.

For Colgate-Palmolive (CL), the current ratio decreased from 1.277 in 2022 to 1.1135 in 2023. This decrease indicates worsening liquidity, a trend that's unfavorable as it signifies potentially less ability to cover short-term liabilities. Historically, CL's current ratio has oscillated around the 1.0 mark but has remained below the industry median significantly. The decrease in 2023 doesn’t add to the company's financial resilience. Thus, it scores 0 in this criterion.

Number of shares not diluted?

Shares Outstanding is an essential criterion to track because it gives insight into a company’s capital structure and ownership dilution. A decrease in shares outstanding often indicates share buybacks, which can be positive or negative for shareholder value.

In 2023, Colgate-Palmolive (CL) reported 827,400,000 shares outstanding, down from 836,400,000 in 2022. This reduction in outstanding shares is indicative of ongoing share buybacks. By reducing the number of shares in circulation, the company enhances the value of remaining shares, often signaling confidence in its own financial health and future prospects. Over the last 20 years, this trend of reducing shares outstanding can be observed consistently. Starting from 1,134,634,146 shares in 2003, the count has generally trended downward. This consistency in reducing shares outstanding over time points to a long-term strategy of returning value to shareholders predominantly through buybacks. This criterion, therefore, earns 1 point for Colgate-Palmolive in the Piotroski analysis, as the company's actions have resulted in fewer shares outstanding in 2023 compared to 2022, which is a promising trend for existing shareholders.

Operating of Colgate-Palmolive (CL)

Cross Margin is growing?

The Gross Margin criteria evaluates the company's ability to manage production costs relative to its total sales revenue. An increasing Gross Margin suggests improved efficiency and profitability.

For Colgate-Palmolive (CL), the Gross Margin increased from 0.5704 in 2022 to 0.5821 in 2023. This increase reflects improved cost management and profitability, particularly in a challenging economic environment. Over the last 20 years, the Gross Margin fluctuated but exhibited an overall increasing trend, peaking at 0.6082 in 2020. When compared to the industry median, Colgate consistently outperformed, which underscores its operational efficiency. This growth in Gross Margin adds 1 point to the Piotroski score, indicating a positive review.

Asset Turnover Ratio is growing?

Change in Asset Turnover is a measure of how efficiently a company uses its assets to generate sales.

The Asset Turnover for Colgate-Palmolive (CL) has increased from 1.1678 in 2022 to 1.2114 in 2023, indicating an improvement in efficiency. Historically, Asset Turnover has exhibited fluctuations, with a peak in 2008 at 1.526 and a trough in 2020 at 1.0642. Given the 2023 value, the trend is positive and has earned Colgate-Palmolive 1 point according to Piotroski’s criteria.