Last update on 2024-06-06

CMS Energy (CMS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Detailed analysis of CMS Energy's Piotroski F-Score for 2023, scoring 4 out of 9 on financial health metrics.

Short Analysis - Piotroski Score: 4

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

The Piotroski F-Score evaluates a company's financial position using nine criteria focusing on profitability, liquidity, and operating efficiency. CMS Energy (CMS) received a score of 4 out of 9. Here's a breakdown: Profitability - The company has a positive net income of $887M in 2023 and a positive cash flow from operations of $2.309B. However, Return on Assets (ROA) decreased slightly in 2023, indicating weaker asset efficiency. Nonetheless, operating cash flow exceeds net income significantly. Liquidity - The company's leverage increased slightly, implying increased financial risk. The current ratio declined, suggesting weaker liquidity. Additionally, the number of shares outstanding increased, causing dilution. Operating Efficiency - The gross margin grew positively, but the asset turnover ratio decreased, pointing to decreasing efficiency in using assets to generate sales.

Insights for Value Investors Seeking Stable Income

CMS Energy's Piotroski score of 4 suggests that it has both strengths and weaknesses as an investment. While the company exhibits profitability and generating substantial cash flow, its decreased ROA and compromised liquidity are concerns. Additionally, the dilution of shares and declining asset turnover may indicate some underlying inefficiencies. Therefore, potential investors should proceed with caution and possibly look deeper into the company's overall strategy and financial health before making an investment decision.

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

Profitability of CMS Energy (CMS)

Company has a positive net income?

Net income indicates the company's profitability. A positive net income suggests the company is generating more revenue than expenses.

CMS Energy's net income for 2023 is $887,000,000, reflecting a positive trend. Over the past 20 years, the net income has generally seen an upward trajectory, with significant recovery from earlier losses. The company consistently showed positive net income from 2008 onwards, except for some dips, such as in 2020's $837,000,000. Overall, this positive net income adds 1 point for this Piotroski criterion, indicating strong profitability.

Company has a positive cash flow?

The criterion evaluates if CMS Energy's Cash Flow from Operations (CFO) is positive in 2023. Positive CFO indicates that the company is generating ample cash from its core operations.

For 2023, CMS Energy (CMS) reports a Cash Flow from Operations (CFO) of $2,309,000,000. This is significantly positive and thus, one point is awarded under this criterion. A positive cash flow from operations is a crucial indicator as it shows that the company effectively converts its earnings into cash. Over the last 20 years, CMS has generally shown a positive trend, consistently maintaining positive CFOs since 2008. This steady performance underscores the firm's operational efficiency and financial health, supporting its capacity to invest in growth and manage debt.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is a critical measure of a company's profitability related to its total assets. Comparing ROA year-over-year shows whether the company is becoming more efficient in generating profit from its assets.

The ROA for CMS Energy (CMS) decreased slightly from 0.0279 in 2022 to 0.0273 in 2023. This translates to a reduction in ROA. As a result, CMS Energy does not earn an additional point for ROA improvement under the Piotroski Analysis. Importantly, when contextualized against the last 20 years of CMS Energy’s data and industry median ROA, it appears CMS Energy consistently performs below the industry median. This suggests room for efficiency improvement in leveraging its asset base, as the industry typically shows considerably higher median ROA figures ranging from 0.5874 in earlier years to approximately 0.41 in more recent years. This relative underperformance over time could indicate operational challenges or shifts in strategic asset utilization that merit closer examination for potential investors.

Operating Cashflow are higher than Netincome?

This criterion evaluates the relationship between a company's operating cash flow and its net income. Operating cash flow should ideally be higher as it suggests that the company is generating sufficient cash from its operations, making income figures more credible.

For CMS Energy, the operating cash flow for 2023 was $2,309,000,000, significantly higher than the net income of $887,000,000. This difference of $1,422,000,000 indicates a robust cash generation capability from its core operations relative to its reported profitability. Over the past 20 years, CMS Energy's operating cash flow and net income figures show variability, but the substantial gap in 2023 portrays a strong operational performance. Hence, CMS Energy scores a full 1 point in the Piotroski Analysis for this criterion, which is a positive indicator.

Liquidity of CMS Energy (CMS)

Leverage is declining?

Change in Leverage assesses alterations in a company's financial structure and its reliance on debt.

Over the past 20 years, CMS Energy's leverage has shown fluctuating levels, peaking in 2003 at 0.4887 and reaching a low of 0.3773 in 2011. In recent years, leverage has been relatively stable, with 0.4205 in 2021, slightly increasing to 0.4207 in 2022 and then to 0.4347 in 2023. This upward trend from 2022 to 2023 indicates a rise in debt relative to equity. Higher leverage can imply increased financial risk, especially if the company faces adverse economic conditions or interest rate hikes, thus earning 0 points in this criterion.

Current Ratio is growing?

This criterion compares the current ratio between years to determine liquidity trends. Maintaining a healthy current ratio is crucial for assessing a firm's short-term financial health.

In 2023, CMS Energy's current ratio was 0.9807, compared to 1.1501 in 2022. This reflects a decline, signaling a potential weakening in liquidity. Consequently, no points should be added based on this metric. The historical data indicates a fluctuation in the current ratio over the past two decades, with the present ratio below the 20-year average of approximately 1.18, contrasting with the industry's median which consistently remained below 1. Overall, the trend presents challenges for CMS in meeting short-term liabilities.

Number of shares not diluted?

Change in Shares Outstanding assesses whether a company has been issuing or buying back shares, which impacts dilution and shareholder value.

CMS Energy's Outstanding Shares have risen from 289,500,000 in 2022 to 294,400,000 in 2023, indicating an increase. This is a noteworthy point as rising outstanding shares can lead to shareholder dilution, impacting ownership percentages and received dividends. Over the last 20 years, CMS Energy has consistently increased its shares, growing from 146,666,667 in 2003 to 294,400,000 in 2023, reflecting a long-term trend of dilution. Consequently, CMS Energy receives a score of 0 for this criterion, as the increase in shares is regarded negatively in the context of shareholder value within the Piotroski analysis.

Operating of CMS Energy (CMS)

Cross Margin is growing?

Gross Margin measures a company's financial health and efficiency in producing goods or services, reflecting profitability.

In 2023, CMS Energy (CMS) reported a Gross Margin of 0.3835, up from 0.3213 in 2022. This substantial increase indicates better cost management and operational efficiency. Compared to the industry median of 0.4109 in 2023, CMS' performance is slightly below, but the positive trend is still notable. The improvement aligns with historical data showing variability. Thus, for the Piotroski analysis, CMS Energy earns 1 point for this criterion.

Asset Turnover Ratio is growing?

Asset Turnover is a measure of a company's efficiency in using its assets to generate sales. It is important as it indicates how well the company's resources are being utilized.

Comparing the asset turnover ratios, CMS Energy's asset turnover decreased from 0.286 in 2022 to 0.2301 in 2023. This indicates a decline in the company's efficiency in using its assets to generate sales. Based on the Piotroski F-Score criteria, this trend is unfavorable, resulting in 0 points for asset turnover. Historical data reflects a declining trend over the last 20 years, reinforcing the need for improvement in asset utilization strategies.