Last update on 2024-06-07

Clorox (CLX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Detailed Piotroski F-Score analysis for Clorox (CLX) in 2023. Understand its financial health with a score of 5/9. Insights on profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score is used to assess the financial health of a company, ranging from 0 to 9, with Clorox (CLX) scoring 5. This analysis reviews Clorox's profitability, liquidity, and operating efficiency using nine criteria. Clorox shows positive net income and cash flow, and its operating cash flow exceeds net income, highlighting good cash generation. However, its ROA has declined, and leverage has increased over the year. The current ratio has dropped slightly and some shares have been diluted. On a positive note, the gross margin and asset turnover ratio have improved, indicating better operational performance. Overall, Clorox exhibits mixed results in financial stability and growth potential.

Insights for Value Investors Seeking Stable Income

Based on a Piotroski score of 5, Clorox shows an average financial condition. It has strong cash flow and improved operational efficiency but faces challenges with declining ROA and increased leverage. While there's potential with positive cash generation and operational improvements, investors should be cautious due to the declining profitability and increased financial risk. Further investigation into market conditions and Clorox's strategies to manage debt and improve ROA would be beneficial before making investment decisions.

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

Profitability of Clorox (CLX)

Company has a positive net income?

Positive net income is crucial as it shows the company is profitable, adding financial stability and growth prospects.

Clorox (CLX) reported a net income of $149,000,000 in 2023, which is positive. Hence, Clorox earns 1 point for this criterion. Comparatively, this is a significant decline from previous years; for instance, in 2021, the net income was $710,000,000. This decreasing trend over three years showcases potential challenges or headwinds that the company faces, signaling potential issues in maintaining profit levels. While a positive net income is good, observing such a decline warrants investors to investigate the reasons behind it, including market conditions and company-specific factors affecting profitability.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) represents the net cash generated from operating activities, excluding any expenses from capital investments. It’s crucial as it reflects the core operating performance.

For Clorox (CLX), the company reported a positive CFO of $1,158,000,000 in 2023. This suggests strong operational efficiency and the ability to generate significant cash through core business activities, earning a point in the Piotroski score. Over the last 20 years, Clorox has demonstrated consistent positive cash flow from operations, except for a noticeable dip in 2022 ($786,000,000). Annual fluctuation is common, yet the overall trend indicates robust and generally increasing cash flow.

Return on Assets (ROA) are growing?

Comparing ROA from one year to another helps investors gauge a firm's profitability trends and operational efficiency.

In 2023, Clorox (CLX) had an ROA of 0.0246 compared to 0.074 in 2022, indicating a decline. This decrease signals that the firm's asset utilization in generating profits has declined, which can be considered unfavorable by investors, especially when comparing it to the industry median ROA trend over the years, which shows more stability and higher values consistently above 0.44.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is important as it indicates that the company is actually generating sufficient cash from its core operations and less reliant on non-cash elements like accruals.

For Clorox (CLX) in 2023, the Operating Cash Flow stands at $1.158 billion while the Net Income is $149 million. This yields a significant positive gap where Operating Cash Flow exceeds Net Income by $1.009 billion, thereby adding 1 point to the Piotroski score. This trend is favorable as it indicates healthy cash generation capability in comparison to reported earnings, hinting at higher earnings quality. Historically, Clorox demonstrates fluctuations but for 2023 this criterion meets expectations positively.

Liquidity of Clorox (CLX)

Leverage is declining?

This criterion examines the company's change in leverage (debt levels) over a year. Lower leverage indicates reduced risk associated with high debt levels.

Comparing the leverage from 2022 (0.4527) to the leverage in 2023 (0.4688), it's clear that Clorox's leverage has increased over this period. This is reflected in a 3.51% increase. Over the last 20 years, Clorox's leverage has shown variability with significant peaks and troughs. For example, the leverage fluctuated from 0.1355 in 2003 to as high as 0.5867 in 2005. This long-term view reveals that the recent increase is part of a broader pattern of leverage fluctuation, although maintaining lower leverage generally is favorable as it signifies stronger financial stability and lower credit risk. Consequently, the leverage increase in 2023 does not align with a positive Piotroski score trajectory, which favors companies reducing their leverage.

Current Ratio is growing?

The Current Ratio compares a company’s current assets to its current liabilities to measure the firm’s ability to pay short-term obligations. This ratio is crucial as it provides insight into the company’s liquidity and financial health, particularly important for creditors and investors.

The Current Ratio for Clorox (CLX) in 2023 is 0.9536, a slight decrease from 0.9669 in 2022. This translates to a 1.4% decline in the Current Ratio year-over-year, suggesting a marginally weakened position to cover short-term liabilities. For a deeper perspective, let's look at the historical trend: in the last 20 years, Clorox's Current Ratio fluctuated significantly, peaking at 1.4245 in 2020 but generally remaining below the industry median (e.g., the median for 2023 is 1.5029). This long-term trend combined with a declining short-term trend indicates potential liquidity concerns, thus Clorox does not get a 1 point in this criterion.

Number of shares not diluted?

Change in the number of shares outstanding can indicate company actions like buybacks or new issuances. It's vital as it impacts EPS and shareholder value.

In 2022, Clorox (CLX) had 123,113,000 shares outstanding, which increased to 123,589,000 in 2023. Historically, CLX reduced its shares from 220,692,000 in 2003 to 123,113,000 by 2022. The rise in shares in 2023, after a long-term buyback trend, signals potential dilution. Thus, the criterion gets 0 points.

Operating of Clorox (CLX)

Cross Margin is growing?

Gross margin represents the proportion of money left over from revenues after accounting for the cost of goods sold (COGS). It is crucial because it reflects the core profitability and efficiency of a company's production process.

Clorox's Gross Margin increased from 0.3581 in 2022 to 0.3936 in 2023, showing a positive trend. This boost, from 35.81% to 39.36%, indicates improved efficiency and profitability in their core operations. Over the past 20 years, despite some fluctuations, the Gross Margin has generally been strong. While it had dropped significantly in 2021 and 2022 below its long-term average (around 43%), the rebound in 2023 is promising. However, when comparing Clorox's 2023 Gross Margin to the industry's median of 44.11%, it still lags behind. Yet, the upward trend earns Clorox 1 point, indicating an improvement in profitability relative to the previous year.

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 sales. A higher asset turnover indicates effective use of assets.

In 2023, Clorox (CLX) recorded an Asset Turnover of 1.221, compared to 1.1378 in 2022, marking an increase. This increase suggests that Clorox has become more efficient at utilizing its assets to generate sales, signaling a positive development in their operational performance. From a long-term perspective, analyzing data over the past 20 years shows fluctuations, but 2023's figure is a return to higher efficiency observed in earlier years, such as 2015 with 1.3429. Such a trend is favorable, adding 1 point to the Piotroski score.