Last update on 2024-06-06

Cooper Companies (COO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analyze Cooper Companies (COO) using the 2023 Piotroski F-Score. Learn insights on profitability, liquidity, and leverage with a final score of 5/9.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score rates a company's financial strength from 0 to 9, based on profitability, liquidity, and efficiency criteria. Cooper Companies (COO) has a score of 5 out of 9. They show a positive net income and cash flow for 2023, signaling good profitability. However, their Return on Assets (ROA) is declining, which shows less efficient use of assets. On liquidity, COO's leverage increased while the current ratio grew, indicating mixed financial health. The company is also issuing more shares, which is not favorable. In terms of operations, their gross margin is up, denoting better cost efficiency, but asset turnover has dropped, reflecting less efficient use of assets.

Insights for Value Investors Seeking Stable Income

Cooper Companies (COO) have a moderate Piotroski F-Score of 5, indicating strengths in profitability and some aspects of liquidity, but weaknesses in asset utilization and share dilution. Investors might want to keep an eye on their efficiency improvements and how they manage their debt and share issuance. While the stock shows potential, it's worth investigating further before making a decision to invest.

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

Profitability of Cooper Companies (COO)

Company has a positive net income?

Examining whether the net income is positive assists in assessing the company's profitability over time. A positive net income indicates a profitable fiscal period.

For Cooper Companies (COO), the net income of $294.2 million in 2023 indicates a profitable year. This is crucial as it implies the company is generating more revenue than expenses. Analyzing the historical net income data over the past 20 years demonstrates fluctuations but an overall upward trend, especially notable with years such as 2019 ($466.7 million) and 2021 ($2.944 billion). Despite some downturns, like in 2007 with a net loss of $11.19 million, the company has shown resilience and growth. Based on the positive net income of 2023, Cooper Companies scores 1 point for this criterion.

Company has a positive cash flow?

One of the primary factors in the Piotroski Score is the Cash Flow from Operations (CFO), which indicates the money that a company generates from its usual business operations. A positive CFO is a sign of financial health as it means the company is generating enough internal funds to sustain operations without relying on external financing.

For 2023, Cooper Companies (COO) reported a CFO of $607,500,000 which is positive. This marks a consistent trend of positive CFO over the past twenty years, indicating stable operating efficiency. Positive CFO underscores the firm's capacity to generate cash internally, reducing reliance on debt and thereby maintaining financial flexibility. Given this, COO earns 1 point for this criterion. This positive indicator aligns with the trend observed, as COO has maintained a positive CFO for the entirety of the twenty-year period. Specifically, it reflects a continued strong performance compared to prior years, albeit slightly lower than the previous two years ($738,600,000 in 2021 and $692,400,000 in 2022).

Return on Assets (ROA) are growing?

ROA represents Return on Assets, which measures a company's profitability relative to its total assets. It is an important indicator for assessing how efficiently a company is utilizing its assets to generate earnings.

Comparing the ROA of Cooper Companies in 2023 (0.0254) with that in 2022 (0.0366), we observe a decline. This is a negative trend, as it indicates less efficiency in asset utilization year-over-year. Consequently, 0 points should be added for this criterion. Looking over the past 20 years, the company's highest ROA was recorded in 2019 at 0.0668, and the lowest in 2023 at 0.0254. Compared to the industry's median ROA ranging from 0.5037 (2003) to 0.5549 (2023), Cooper Companies' ROA has been significantly lower consistently. This discrepancy indicates that COO might need to revisit its asset management strategies to close the performance gap with its industry peers.

Operating Cashflow are higher than Netincome?

The criterion assesses whether a company’s operating cash flow is higher than its net income for that period. This is crucial as operating cash flow is a more reliable indicator of financial health since it measures the cash that a company generates from its regular business operations.

For Cooper Companies (COO) in 2023, the operating cash flow is $607,500,000 while the net income is $294,200,000. The operating cash flow being significantly higher than net income indicates strong cash generation from operations. This trend is positive because it suggests that the company's earnings are backed by solid cash flows, rather than being tied up in receivables or accounting adjustments. Given these values, Cooper Companies would score a point for this criterion under the Piotroski F-Score.

Liquidity of Cooper Companies (COO)

Leverage is declining?

Change in Leverage measures whether a company is increasing or decreasing its reliance on financial debt. It's important as high leverage can pose financial risks.

For 2023, the Leverage for Cooper Companies increased to 0.2165 from 0.2046 in 2022. This results in 0 points in our Piotroski analysis. The historical data indicates a fluctuating leverage trend over the past 20 years, peaking in 2008 at 0.333 and hitting a low in 2013 at 0.0962. The recent increase might raise concerns about the company’s dependency on external debt financing, potentially elevating its financial risk in a rising interest rate environment.

Current Ratio is growing?

A current ratio measures a company's ability to cover short-term liabilities with its short-term assets. An increase suggests improved liquidity.

Cooper Companies' current ratio increased from 1.1979 in 2022 to 1.7594 in 2023, earning them 1 point. Although the current ratio has improved, it still trails behind the industry median of 2.3418 in 2023, suggesting there's room for enhancement in liquidity management. Historically, Cooper Companies' 2023 ratio shows a positive trend reversal from the previous year and indicates a cautious improvement in financial health. Over the last 20 years, Cooper Companies experienced a fluctuating current ratio, with lows akin to 1.0475 in 2019 and highs like 2.8725 in 2009, demonstrating the cyclical nature of their liquidity management.

Number of shares not diluted?

Change in Shares Outstanding evaluates whether a company is diluting its shares, which can affect shareholder value. A decrease is favorable.

The Outstanding Shares for Cooper Companies have increased from 197.2 million in 2022 to 198 million in 2023, translating to an increase of 0.81 million shares. Historically, Cooper Companies have seen substantial changes in their share count, particularly evident with sharp increases post-2019, where shares nearly quadrupled. This upward trend in Outstanding Shares for 2023 negatively impacts shareholder value by diluting earnings per share (EPS) and is reflective of a potential negative trend. Therefore, no point is awarded for this criterion, consistent with the Piotroski Score methodology.

Operating of Cooper Companies (COO)

Cross Margin is growing?

Increase in gross margin metric evaluates if a company is becoming more efficient in terms of cost of goods sold relative to revenue.

For Cooper Companies (COO), the Gross Margin increased from 0.6467 in 2022 to 0.6562 in 2023. This is an uptick, indicating improved efficiency or pricing power. Historically, COO's gross margin has sustained an upward trend, often outperforming the industry's median. Adding 1 point for this improvement is justified, as it signals strong operational performance.

Asset Turnover Ratio is growing?

This criterion evaluates the efficiency with which a company uses its assets to generate sales, a higher ratio indicates better performance.

In 2023, Cooper Companies (COO) reported an Asset Turnover ratio of 0.3104, compared to 0.3136 in 2022. This represents a slight decrease of 0.0032 in the ratio. Consequently, we assign 0 points for this criterion as the Asset Turnover has not improved. Analyzing the historical data over the past two decades, it's evident that the company's efficiency in utilizing its assets has generally declined, hitting a peak in 2004 at 0.6462, but consistently trending downward since. This suggests potential operational inefficiencies or a shift in business strategy that relies less on asset utilization.