Last update on 2024-06-05

Catalent (CTLT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 2/9)

Catalent (CTLT) Piotroski F-Score Analysis 2023 reveals a final score of 2/9, highlighting concerns in profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 2

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

The Piotroski F-Score for Catalent (CTLT) is 2 out of 9, suggesting weak overall financial health. While the company has positive cash flow and their operating cash flow is higher than net income, indicating some earnings quality, several negative factors affect its overall performance. These include a significant decline in net income, decreasing return on assets, and poor liquidity as indicated by a decreasing current ratio. Additionally, the gross margin and asset turnover are down, leverage has slightly increased, and there has been dilution in shares, further concerning potential investors.

Insights for Value Investors Seeking Stable Income

Given the low Piotroski score of 2, combined with several financial weaknesses such as fluctuating profitability, increasing debt, and share dilution, Catalent (CTLT) does not appear to be a strong investment at this time. It's advisable for investors to look for companies with stronger financial health and more stable performance metrics.

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

Profitability of Catalent (CTLT)

Company has a positive net income?

Net income is the total profit of a company after taxes and other expenses have been subtracted from total revenue. It indicates profitability.

Catalent's net income for 2023 is -$256 million, indicating a negative trend in profitability. Historically, Catalent has seen fluctuations in its net income, with significant positive figures in 2020 and 2021 ($221 million and $585 million, respectively) before experiencing a stark decline in 2023. Ultimately, a negative net income is a cause for concern and results in no points added to the Piotroski Score for this criterion.

Company has a positive cash flow?

Positive CFO signals a company's ability to generate sufficient cash from its core activities, essential for liquidity and growth.

Catalent (CTLT) shows a positive CFO of $254 million in 2023, which means it can cover operating expenses and has growth potential. Historically, CTLT has had consistent positive CFO, peaking at $440 million in 2020. Although there was a decline from $439 million in 2022 to $254 million in 2023, the figure remains firmly positive, suggesting a healthy level of operational cash generation. This is a good sign, adding 1 point to the Piotroski score.

Return on Assets (ROA) are growing?

The criterion compares the most recent Return on Assets (ROA) to the previous year. ROA shows how efficiently a company generates profit from its assets.

Catalent's ROA declined significantly from 0.0509 in 2022 to -0.0241 in 2023, marking a shift from a profitable efficiency in utilizing assets to a loss-making position. This dramatic decline results in a score of 0 for this criterion. When juxtaposed against the industry's relatively stable median ROA of approximately 0.5 over the last 20 years, Catalent's recent performance raises concerns. The company's operational cash flows fluctuated over the years but showed generally strong figures, such as an operating cash flow of $440,000,000 in 2020 and $433,000,000 in 2021. However, the noticeable decrease to $254,000,000 in 2023 aligns with the reduction in ROA, indicating that internal inefficiencies or market conditions significantly impacted its profit-generating capabilities from assets.

Operating Cashflow are higher than Netincome?

This criterion examines if a company’s operating cash flow is greater than its net income, signaling potential earnings quality.

For Catalent (CTLT) in 2023, the Operating Cash Flow was $254 million, while the Net Income was -$256 million. Since the Operating Cash Flow is higher than the Net Income, this results in a good score for this criterion, adding 1 point. This indicates that Catalent's earnings quality might be better than what net income alone suggests. Looking at the historical data, Catalent's operating cash flow has fluctuated over the years, but the latest figures display a declining trend from its peak in 2020 ($440 million). Despite the drop, it remains positive. In contrast, the net income history reveals a significant loss in 2023 (-$256 million). This sharp decline, compared to previous profitable years (e.g., $585 million in 2021 and $499 million in 2022), emphasizes the importance of this criterion. Reliance on net income alone might obscure insights into the company’s actual operating performance.

Liquidity of Catalent (CTLT)

Leverage is declining?

Change in Leverage assesses whether the company has reduced its debt-to-equity ratio, indicating improved financial stability.

For Catalent (CTLT), the leverage has marginally increased from 0.3969 in 2022 to 0.4002 in 2023, resulting in 0 points for this criterion. Over the past decade, the company has displayed a consistent effort to decrease its leverage from a peak of 0.8691 in 2013 to lower levels. However, the recent slight uptick this year might indicate increased reliance on debt, which potential investors should monitor.

Current Ratio is growing?

Current Ratio measures company's ability to pay short-term obligations with its short-term assets.

In 2023, Catalent's Current Ratio decreased to 1.7595 from 2.6566 in 2022. This decrease indicates a possible decline in liquidity, as the current ratio fell below the industry median of 2.1191 in 2023. Historically, the company's current ratio has shown variation, peaking in 2022. The 2023 ratio of 1.7595 signifies lower liquidity relative to previous years, which could raise concerns about short-term financial stability if this trend continues.

Number of shares not diluted?

This criterion evaluates if a company has issued more shares recently. Increasing the number of shares can dilute the ownership of existing shareholders.

In 2023, Catalent's outstanding shares increased to 181,000,000 from 176,000,000 in 2022, reflecting an increase of 5,000,000 shares. This trend is generally viewed negatively since it can dilute the positions of existing shareholders unless the new shares are being used to raise capital for profitable growth ventures. Historically, Catalent’s outstanding shares have shown a generally increasing trend, growing from 117,321,337 shares in 2011 to 181,000,000 shares in 2023. Over the last decade, this trend indicates frequent equity financing, suggesting potential needs for capital, but also persistent dilution for shareholders.

Operating of Catalent (CTLT)

Cross Margin is growing?

The gross margin reveals the percentage of revenue that exceeds its cost of goods sold, important for assessing financial health.

For 2023, Catalent (CTLT) reported a gross margin of 0.244 as compared to 0.3361 in 2022. This represents a decrease. Historically, the gross margin for CTLT fluctuated around the low 0.3 mark between 2011 and 2022, with the highest being 0.3382 in 2021. Yet, in 2023, there’s a notable drop to 0.244, which is significantly below not only its own historical values but also substantially unfavorably compares to the industry median of 0.5013 for the same year. Given this trend, Catalent scores 0 points on this Piotroski criterion.

Asset Turnover Ratio is growing?

The change in asset turnover measures how efficiently a company uses its assets to generate revenue.

When comparing Catalent's asset turnover in 2023 (0.4006) to that in 2022 (0.4895), it is evident that the asset turnover has decreased. The decrease signals a decline in efficiency as the company generated less revenue per asset dollar in 2023 than in 2022. Over the last 20 years, Catalent's asset turnover ratios have varied, with a peak in 2012 (1.0798) and generally decreasing since. Given this trend, the score for this criterion is 0.