Last update on 2024-06-05

Caesars Entertainment (CZR) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

In-depth Piotroski F-Score analysis of Caesars Entertainment (CZR) for 2023, scoring 7/9. Explore the financial health, profitability, and operational efficiency trends.

Short Analysis - Piotroski Score: 7

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

The Piotroski F-Score analysis for Caesars Entertainment (CZR) gives them a score of 7 out of 9, indicating a strong financial standing based on the model's criteria. Caesars Entertainment shows positive trends in profitability and operational efficiency with high net income and cash flow from operations in 2023. The return on assets has improved and the operating cash flow is higher than net income, suggesting efficient use of assets and robust cash generation. However, there are some concerns regarding liquidity, share dilution, and declining leverage. The current ratio has slightly decreased, reflecting a weaker liquidity position than industry peers, and the number of outstanding shares has increased, indicating some dilution. Despite these minor drawbacks, the overall financial health of the company appears solid.

Insights for Value Investors Seeking Stable Income

Given Caesars Entertainment's strong Piotroski score of 7, it seems like a good option for potential investors looking for solid undervalued stocks. The company has shown impressive recovery in net income, cash flow, and asset utilization along with better operational efficiency. However, investors should be cautious of the liquidity issues and share dilution. It is worth further investigation especially for those who prioritize cash flow and profitability in their investment strategy.

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

Profitability of Caesars Entertainment (CZR)

Company has a positive net income?

Net income is the total profit of a company after expenses and taxes have been deducted. It is a crucial indicator of financial health.

In 2023, Caesars Entertainment (CZR) posted a net income of $786,000,000, an enormous swing from its negative net income in the previous years ('2019: -$1.757B, '2020: -$1.019B, '2021: -$899M). The fact that the company has turned profitable after years of losses is significant and positive for stakeholders. Thus, CZR earns 1 point for this criterion in the Piotroski Analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the amount of cash a company generates from its regular business activities. It demonstrates the company’s ability to generate sufficient positive cash flow to maintain and grow operations without the need for external financing.

For the year 2023, Caesars Entertainment's Cash Flow from Operations (CFO) stands at $1,809,000,000, marking a positive trend. This positive CFO is particularly significant when considering the company's operating cash flow over the past two decades. Historically, Caesars has had fluctuations in operating cash flow, including negative CFO in certain years like 2020 (-$582 million), indicative of challenges. However, the positive CFO of 2023 is a strong indicator of operational health, showing a robust improvement and suggesting efficient cash management. Therefore, adding 1 point for a positive cash flow is justified and illustrates the company’s reinforced ability to generate cash from its core operations and financial stability.

Return on Assets (ROA) are growing?

The Change in Return on Assets (ROA) criterion assesses how much a company's ROA has improved or deteriorated over a given period, reflecting changes in management efficiency and profitability. It's crucial as it indicates the firm's effectiveness in utilizing its assets to generate profits.

Caesars Entertainment (CZR) has shown a significant positive change in its ROA, improving from -0.0251 in 2022 to 0.0235 in 2023. This shift overturned a negative return, signaling enhanced profitability and better asset utilization. Historically, radio.com, compared to its 20-year pattern of operating cash flow, showcases a volatile, but improving trend. Notably, the industry median ROA values, ranging from 0.3909 to 0.4982, place Caesars' improved ROA into context, revealing it still lags behind industry peers but is moving in a positive direction. Overall, this trend is solidly favorable, earning the company 1 point for this criterion.

Operating Cashflow are higher than Netincome?

The Operating Cash Flow higher than Net Income criterion assesses the quality of earnings in a company. Cash flow from operations essentially measures the cash inflow from a company's core business operations, while net income includes non-cash items. If operating cash flow is higher than net income, it typically suggests that the company is generating strong cash flows from its actual business activities, thus indicating healthy operational efficiency.

For Caesars Entertainment (CZR) in 2023, the operating cash flow stands at $1,809,000,000 whereas the net income is $786,000,000. This yields a simple comparison where the operating cash flow indeed surpasses the net income. This criterion is met, and a score of 1 point is accordingly granted to CZR. Examining past trends, we observe fluctuations: year-by-year operating cash flows: [735,900,000; 866,400,000; 591,500,000; 1,558,900,000; 1,597,700,000; 534,500,000; 220,200,000; 170,800,000; 125,600,000; 28,366,000; 23,536,000; 33,879,000; 56,715,000; 97,570,000; 130,241,000; 323,280,000; 312,526,000; -582,000,000; 1,172,000,000; 975,000,000; 1,809,000,000] and net incomes: [293,000,000; 368,000,000; 236,000,000; 536,000,000; 619,000,000; -5,197,000,000; 828,000,000; -831,000,000; -725,000,000; -991,000; 18,897,000; -14,425,000; 114,183,000; 24,802,000; 73,940,000; 95,235,000; 81,001,000; -1,757,000,000; -1,019,000,000; -899,000,000; 786,000,000]. The high operational cash flow in 2023 is a positive trend and suggests improved earnings quality for Caesars Entertainment given ther robust cash generation capabilities from its core business operations.

Liquidity of Caesars Entertainment (CZR)

Leverage is declining?

Change in Leverage evaluates a company's ability to meet its financial obligations. It's essential to consider because decreasing leverage indicates improved financial health, reducing risk for investors.

For Caesars Entertainment (CZR), the leverage marginally decreased from 0.7537 in 2022 to 0.7488 in 2023. This decrease in leverage is a positive trend for the company, indicating that its financial risk is slightly lower compared to the previous year. Historically, the company's leverage has seen significant fluctuations, notably peaking dramatically in 2013 before stabilizing in recent years. The relatively stable and decreasing leverage in recent years suggests improved financial management and risk mitigation, making the company slightly less risky for investors.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. It is vital as it indicates liquidity.

For Caesars Entertainment, the Current Ratio has decreased slightly from 0.7879 in 2022 to 0.7602 in 2023. This reduction suggests a marginal decline in the company's liquidity position, meaning it has slightly less cover for its short-term liabilities with short-term assets compared to the previous year. In the grander scheme of the last 20 years, the company had fluctuating Current Ratios, even reaching as high as 2.4127 in 2020. However, since its ratio is also below the Industry Median for 2023 of 1.3064, it underscores a somewhat weaker liquidity position relative to its industry peers. In this criterion, we assign CZR 0 points as the Current Ratio did not increase.

Number of shares not diluted?

Change in shares outstanding examines whether the company has diluted its share base over the period. It is crucial as dilution can affect shareholders' equity and the value of their shares.

The Outstanding Shares for Caesars Entertainment have increased from 214 million in 2022 to 215 million in 2023. This increase of approximately 0.47% suggests a slight dilution of shares, which can potentially decrease the value of each existing share. Over the last 20 years, the number of outstanding shares has shown significant fluctuations. For instance, the shares drastically decreased from 125 million in 2008 to 99 million in 2010, then surged to 211 million in 2021. Given the recent increase, we assign 0 points for this criterion, indicating the company has experienced share dilution in 2023.

Operating of Caesars Entertainment (CZR)

Cross Margin is growing?

Gross margin measures a company's financial health, indicating the portion of revenue exceeding the cost of goods sold. It's crucial as it reflects a company's efficiency in managing production costs versus sales. An increasing gross margin suggests better profitability and operational efficiency.

In 2023, Caesars Entertainment (CZR) recorded a gross margin of 0.532, an improvement from the 0.5009 gross margin in 2022. This positive trend signifies enhanced operational efficiency and profitability. Notably, the company's gross margin has consistently outperformed the industry median over the last 20 years, with 2023 continuing this trajectory as the industry median rose modestly from 0.497 in 2022 to 0.4982 in 2023. Over a two-decade span, CZR's strategic initiatives in cost management and operational streamlining are evident, enhancing their competitive edge.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company in using its assets to generate revenue. An increasing trend suggests improved efficiency.

In 2023, Caesars Entertainment saw an Asset Turnover of 0.3447 compared to 0.3024 in 2022. This indicates a positive trend as the company's Asset Turnover improved. A 14% increase in Asset Turnover signals that Caesars Entertainment is using its assets more efficiently to generate revenue. Historically, this number shows a steady recovery compared to a dip in 2020 and notably higher levels in mid-2010s. Thus, for this criterion, 1 point is awarded.