Last update on 2024-06-06

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

Comprehensive evaluation of CenterPoint Energy's financial health in 2023 using the Piotroski F-Score, scoring 4/9. Insight into profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 4

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

CenterPoint Energy (CNP) was analyzed using the Piotroski F-Score, which looks at nine financial criteria. The company scored 4 out of 9. Key points include positive net income of $917 million and a significant positive cash flow from operations of $3.877 billion, indicating a healthy ability to generate cash. However, challenges exist with a declining ROA and increasing leverage. CNP's current ratio, a measure of liquidity, also dropped. Positives include an increase in gross margins and operating cash flow being higher than net income, while the main negatives are declining asset turnover and share dilution.

Insights for Value Investors Seeking Stable Income

CenterPoint Energy shows some strengths, particularly in generating cash and a solid gross margin, which suggests some operational efficiency. However, issues like declining ROA, increased financial leverage, and reduced liquidity are concerning. With a Piotroski F-Score of 4, it's not a strong buy but also not a definite sell. For potential investors, this stock may require more in-depth research, especially examining its long-term debt strategies and efforts to improve efficiency before making a decision.

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

Profitability of CenterPoint Energy (CNP)

Company has a positive net income?

The criterion checks if the company's net income is positive, which reflects profitability. Positive net income suggests the company is financially healthy.

CenterPoint Energy (CNP) reported a net income of $917,000,000 in 2023. This indicates a positive net income, earning them 1 point under the Piotroski Analysis. Over the past 20 years, the company's net income shows substantial volatility, with years of both positive and negative earnings. Importantly, the positive net income in recent years indicates a recovery from previously negative figures, signifying a good trend for financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated and used by a company’s core business activities. This is crucial as it shows the company’s ability to generate sufficient cash from its operations to maintain and grow the business without relying on external financing.

CenterPoint Energy (CNP) reported a Cash Flow from Operations (CFO) of $3.877 billion in 2023, which is positive. This marks a significant increase compared to previous years and enhances the firm's financial health. Positive CFO merits 1 point on the Piotroski scale. Historical data: CFO has fluctuated but remained predominantly positive, demonstrating strong cash flow management. Before 2023, the highest CFO was $2.136 billion (2018). Comparatively, 2023's CFO is notably higher, suggesting robust operating performance. This positive trend is largely favorable for stability and potential growth.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) evaluates the year-over-year change in net income generated per unit of total assets, indicating operational efficiency and profitability.

The ROA for CenterPoint Energy (CNP) decreased from 0.0277 in 2022 to 0.0234 in 2023. This decline suggests reduced operational efficiency and profitability. Historically, CenterPoint's ROA has fluctuated significantly, with lows in financial crises and highs in stable economic periods. Compared to the industry median ROA, which has shown more consistency, CNP's declining ROA is a concern. Numerically, the industry median ROA in 2023 is 0.4109, much higher than CNP's 0.0234, indicating that CNP is underperforming relative to its peers. Consequently, the score for this criterion is 0, reflecting a negative trend in ROA.

Operating Cashflow are higher than Netincome?

The criterion compares the company's operating cash flow to its net income. A higher operating cash flow than net income indicates strong profitability and quality earnings.

For CenterPoint Energy (CNP), the operating cash flow in 2023 is $3,877,000,000, while the net income is $917,000,000. Since the operating cash flow is significantly higher than the net income, this merits a score of 1 point. Historically, comparing the data over the last 20 years, the operating cash flow has often been higher than net income, indicating consistent strong operational performance. For example, in 2019, operating cash flow was $1,638,000,000 compared to a net income of $791,000,000. This trend reflects the company's ability to generate cash from its core operations, which is a positive indicator for investors.

Liquidity of CenterPoint Energy (CNP)

Leverage is declining?

The criterion examines whether the company's leverage has decreased, as lower financial leverage is often a sign of improved financial health and risk management.

In 2023, CenterPoint Energy (CNP) has a leverage of 0.4421, an increase from 0.3849 in 2022. Over the past 20 years, leverage has seen fluctuations. The current increase signals higher debt relative to equity, marking it as less favorable. This trend is concerning given CNP's historical volatilities and highlights the need for robust debt management practices. Therefore, zero points are assigned based on this criterion.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with current assets. A higher ratio indicates better liquidity.

For CenterPoint Energy (CNP), the Current Ratio decreased from 0.919 in 2022 to 0.7834 in 2023, indicating a decline in liquidity. This decline of roughly 14.8% could raise concerns about the company's short-term financial stability. Comparing this with the industry median current ratio, which is 0.7878 in 2023, CNP's liquidity also falls slightly below the industry standard. Considering the historical data, CNP's current ratio peaked at 2.1275 in 2018, while its nadir over the last two decades occurred in 2005 and 2006 at 0.5468. Given these insights, for the Piotroski Analysis, the score for this criterion is set to 0.

Number of shares not diluted?

The criterion assesses whether shares outstanding have decreased. A decrease typically signals higher earnings and value per share.

The outstanding shares for CenterPoint Energy increased from 629,000,000 in 2022 to 631,000,000 in 2023, indicating an increase. As per the given criterion, this results in 0 points. Historically, looking at the trend over the last 20 years—a general pattern of increasing shares can be observed. In 2003, outstanding shares were at 306,118,354 and have shown a steady increase, reaching 631,000,000 in 2023. This consistent increase might reflect the company's capital-raising efforts or stock-based compensation plans.

Operating of CenterPoint Energy (CNP)

Cross Margin is growing?

Gross Margin is a measure of a company's efficiency and profitability, representing the percentage of revenue remaining after accounting for the cost of goods sold.

The Gross Margin for CenterPoint Energy (CNP) increased from 0.3644 in 2022 to 0.4239 in 2023. This positive trend indicates an improvement in the company's profitability and efficiency, contributing to a higher Piotroski score. Additionally, the Gross Margin for CNP in 2023 is above the industry median of 0.4109, further underscoring its competitive advantage. Thus, CNP earns 1 point for the increase in its Gross Margin.

Asset Turnover Ratio is growing?

Asset Turnover is a measure of a company's efficiency in using its assets to generate sales. It is calculated by dividing sales by total assets.

In 2023, CenterPoint Energy's Asset Turnover ratio was 0.2222, compared to 0.2446 in 2022. This indicates a decrease in Asset Turnover, implying that the company became less efficient in utilizing its assets to generate revenue. Historically, the ratio has seen fluctuations with peaks in 2008 at 0.6031 and a gradual decline to 0.2222 in recent years. Given this trend, no point is added for this criterion as the Asset Turnover has decreased.