Last update on 2024-06-07

Americas Car-Mart (CRMT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 2/9)

Americas Car-Mart (CRMT) scored 2/9 in the 2023 Piotroski F-Score analysis, reflecting financial challenges. Explore detailed insights on profitability, liquidity, and operations.

Short Analysis - Piotroski Score: 2

We're running Americas Car-Mart (CRMT) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score model, which rates a company's financial health between 0 to 9, has rated Americas Car-Mart (CRMT) with a score of 2. The analysis covers profitability, liquidity, and operating efficiency across 9 criteria. While the company had positive net income in 2023 and reduced its number of shares, noticeable issues like negative cash flow, increasing leverage, lower return on assets, and a declining asset turnover ratio were flagged. Additionally, the current ratio dropped slightly, and gross margins also saw a reduction.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 2, Americas Car-Mart (CRMT) shows signs of financial struggle. The combination of negative cash flow, increasing debts, and a downward trend in crucial profitability and efficiency metrics suggests potential instability. Although the company has some positive aspects like share buybacks indicating management's confidence, the overall financial position appears precarious. Prospective investors should proceed cautiously and investigate the causes behind the negative trends before considering an investment in CRMT.

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

Profitability of Americas Car-Mart (CRMT)

Company has a positive net income?

The Net Income criterion checks if the company generated a positive net income during the year. Net income is a key indicator of profitability.

For the fiscal year 2023, Americas Car-Mart (CRMT) reported a net income of $20,432,000. This is a positive net income, thus it would score 1 point for this criterion. Analysing the past 20 years of data, the company has demonstrated fluctuating net income figures with peaks and troughs. Significant peaks are noticeable in 2020 ($104,820,000) and 2021 ($95,014,000), but there is a marked decline in net income in 2023. Despite the decline from previous record years, the 2023 value is up from the 2022 figure of $95,014,000, indicating an effort towards stabilization. The trend appears positive for this particular year but highlights volatility in earnings over the long run.

Company has a positive cash flow?

Evaluating cash flow from operations (CFO) helps assess a company's ability to generate cash from its core activities. Positive CFO indicates healthy operational efficiency.

In 2023, the cash flow from operations (CFO) for Americas Car-Mart (CRMT) was -$135.73 million, which is negative. Over the past 20 years, the company has experienced fluctuating CFOs, with several years reporting negative values. The trend suggests inconsistency in generating cash from operations, marked by significant downturns in the recent three years (2021 to 2023). This volatility in CFO signifies potential challenges in maintaining steady operational efficiency. As the 2023 CFO is negative, we assign 0 points for this criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures the efficiency of a company in generating profit from its assets compared to the previous year. The criterion is to see an increase in ROA.

For Americas Car-Mart (CRMT), the ROA in 2023 is 0.0159, a notable decrease from the ROA of 0.0961 in 2022. This reflects a negative trend and therefore scores 0 for this criterion. Such a decline indicates that the company has been less efficient in utilizing its assets to generate profit compared to the previous year. Comparing with the industry median ROA, which shows 0.1862 for 2023, the company's performance is considerably below the average, suggesting perhaps operational difficulties or an inability to efficiently convert its assets into net earnings. The historical operating cash flows illustrate significant volatility and may have played a role in this declining asset return, further emphasizing potential concerns in operational effectiveness.

Operating Cashflow are higher than Netincome?

You need to compare the company's operating cash flow with its net income to assess cash flow quality.

For 2023, America’s Car-Mart (CRMT) reported an Operating Cash Flow of -$135,728,000, compared to a Net Income of $20,432,000. This results in 0 points as the Operating Cash Flow is lower than the Net Income. Analyzing data from the past 20 years, we observe a mixed trend. There have been significant fluctuations in operating cash flow, ranging from a low of -$135.728 million in 2023 to a high of $24.9 million in 2019. Net Income has also varied, peaking at $104.82 million in 2021 and falling to $4.23 million in 2007. The accruals rate shows a recent trend with negative values, clearly indicated by -0.1032 and -0.0956 for 2022 and 2023, respectively. The importance of this criterion is rooted in the quality of earnings. A higher Operating Cash Flow than Net Income often indicates that a company can generate enough real cash to cover its earnings. Conversely, lower Operating Cash Flow compared to Net Income could signal potential issues with the sustainability of profits. For 2023, the negative Operating Cash Flow despite positive Net Income suggests a concerning trend for America's Car-Mart, and warrants further investigation into underlying causes, such as spending or cash collection issues.

Liquidity of Americas Car-Mart (CRMT)

Leverage is declining?

Leverage shows how much of a company’s assets are financed through debt. It is crucial to understand the risk involved.

Americas Car-Mart (CRMT) saw an increase in leverage from 0.4349 in 2022 to 0.4934 in 2023. This indicates that the company is taking on more debt relative to its equity, which is generally a negative sign for the Piotroski analysis, resulting in a score of 0 under this criterion. Historically, the leverage for CRMT has been fluctuating, reaching its highest point over the past 20 years in 2023. High leverage increases financial risk, impacting the company's ability to secure financing and deal with economic downturns. Hence, increasing leverage is generally not a favorable trend.

Current Ratio is growing?

Current ratio measures a company’s ability to cover short-term liabilities with short-term assets, indicating liquidity.

Comparing the current ratio of 36.414 in 2023 with 37.6507 in 2022, the current ratio has decreased, not increased. Despite this decrease, Americas Car-Mart's current ratio significantly outperforms the industry median, which sits at 1.1692 in 2023. Such high values generally reflect robust liquidity and financial health. However, a decreasing trend might signal caution if it continues. We would set the point to 0 as the current ratio has not increased.

Number of shares not diluted?

Shares Outstanding measures the total number of shares a company has issued to investors. It is important as it impacts key metrics like Earnings per Share.

The Outstanding Shares of Americas Car-Mart (CRMT) decreased from 6,509,673 in 2022 to 6,371,229 in 2023. This marked a reduction of approximately 2.12%. According to the Piotroski F-Score criteria, a decrease in the number of shares outstanding is generally seen as a positive indicator, suggesting that the company might be engaging in share buybacks, a potential signal of management's confidence in the company's future prospects. Looking at the additional data of the last 20 years, the number of shares outstanding has displayed a generally decreasing trend, falling from a high of 11,743,116 in 2003 to its current level in 2023. The recent decrease adds one point to the Piotroski F-Score for CRMT in 2023.

Operating of Americas Car-Mart (CRMT)

Cross Margin is growing?

Gross Margin criterion involves comparing the current year's gross margin to the previous year's. It reflects the company's efficiency in controlling production costs.

The Gross Margin of Americas Car-Mart (CRMT) has decreased from 0.4449 in 2022 to 0.4266 in 2023. This trend is considered bad as it highlights a decline in profitability and efficiency. Historically, the company has had a better gross margin than the industry median, which is notable because CRMT's gross margin trends significantly higher. For instance, in 2022, the industry median was 0.2009, paling in comparison to CRMT's 0.4449. However, even though the margin remains high, the downward trend will cause concerns if it persists.

Asset Turnover Ratio is growing?

Asset Turnover is a key indicator measuring a company's efficiency in utilizing its assets to generate revenue. Higher values imply better performance.

Examining Americas Car-Mart (CRMT), the company's Asset Turnover has decreased from 1.2095 in 2022 to 1.0916 in 2023, indicating a reduction in efficiency. Over the past 20 years, the Asset Turnover has fluctuated, with highs near 1.61 in 2004 and a general decline towards the more recent figures. This deteriorating trend in 2023 is concerning as it reflects less effective use of assets in producing revenue, suggesting a potential area for strategic improvement. Therefore, for the Piotroski F-score, it receives 0 points in this criterion.