Last update on 2024-06-06

D.R. Horton (DHI) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Discover the Piotroski F-Score analysis of D.R. Horton (DHI) for 2023 with a detailed review of financial metrics. Final Score: 5/9.

Short Analysis - Piotroski Score: 5

We're running D.R. Horton (DHI) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score of D.R. Horton (DHI) is 5 out of 9. This score is derived from evaluations of the company's profitability, liquidity, and operating efficiency based on nine criteria. D.R. Horton shows strong financial health in several areas, such as a positive net income and positive cash flow from operations, along with a decreasing leverage ratio and an increasing current ratio. However, the company has seen declines in Return on Assets (ROA), Gross Margin, and Asset Turnover Ratio, indicating some issues in profitability and efficiency. Additionally, the operating cash flow is lower than the net income, and there was a reduction in the number of outstanding shares, reflecting share buybacks.

Insights for Value Investors Seeking Stable Income

D.R. Horton's F-Score of 5 suggests a mixed financial position. While the company shows strengths in liquidity and debt management, declines in ROA, gross margin, and asset turnover ratio point to potential issues in profitability and efficiency. As an investor, it might be worthwhile to look into D.R. Horton, but caution is advised. Thoroughly analyze the company's financial trends, compare them with industry standards, and consider factors like market conditions and the broader economic environment 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 D.R. Horton (DHI)

Company has a positive net income?

Net income represents a company's total earnings or profit, and it's crucial for evaluating financial health.

For D.R. Horton (DHI) in 2023, the net income stands at $4,745,700,000, a positive figure. Over the last 20 years, the company has experienced substantial fluctuations, notably achieving significant profitability in recent years, from $2,373,700,000 in 2020 to $5,857,500,000 in 2022. Despite a slight decline in 2023 from the peak in 2022, the trend showcases resilience and financial strength, meriting a score of 1.

Company has a positive cash flow?

The criterion checks if the company's Cash Flow from Operations (CFO) is positive, indicating effective cash management.

The CFO for D.R. Horton in 2023 is positive at $4,304,100,000, thus earning 1 point for this criterion. Analyzing the trend over the last two decades, it's evident that while the company had negative CFO in some periods, especially during the financial crisis and in various other challenging years, there's been a notable recovery and spike in recent years. This upward trend suggests improved operational efficiency and robust performance.

Return on Assets (ROA) are growing?

Compare the ROA of 0.1508 in 2023 with the ROA of 0.2155 in 2022. If the ROA increased in 2023 add 1 point if not set it to 0. Result: The ROA increased in 2023

D.R. Horton (DHI) experienced a decline in Return on Assets (ROA), from 0.2155 in 2022 to 0.1508 in 2023. Based on the Piotroski Score criteria, we must assign 0 points since ROA did not increase. This marks a decrease in profitability and asset efficiency, which could be concerning for investors. Notably, throughout the past 20 years, D.R. Horton's ROA has fluctuated, like instances in 2015 and 2019 where it was notably lower, reflecting industry cyclicality. The need for robust operating cash flows is imperative in coping with such downturns, and while the operating cash flow in 2023 was notable at $4,304,100,000, the declining ROA compared to an industry median of 0.244 in 2023 points to inferior asset utilization efficiency. This trend must be carefully evaluated in conjunction with other financial metrics.

Operating Cashflow are higher than Netincome?

This measures whether the company can generate more cash from its operations than its accounting profits. It's a signal of good quality earnings and liquidity.

For D.R. Horton (DHI) in 2023, the Operating Cash Flow was $4,304.1 million while the Net Income was $4,745.7 million. Since the Operating Cash Flow is lower than the Net Income, we assign a score of 0 for this criterion. In the last 20 years, the operating cash flow has shown a mixed trend, with periods of both substantial positive and negative cash flows. The net income too has had its ups and downs, but generally, from 2012 onwards, it has been increasing steadily. This gap suggests DHI may need to manage its accruals or working capital more efficiently as their net incomes aren't fully converting into operating cash flows.

Liquidity of D.R. Horton (DHI)

Leverage is declining?

Change in Leverage evaluates a company's level of debt relative to its equity. It's crucial as lower leverage indicates less financial risk.

D.R. Horton's leverage decreased from 0.2015 in 2022 to 0.1578 in 2023, adding 1 point. This decrease is a positive indicator of reduced financial risk. Historically, D.R. Horton’s leverage shows a downward trend, suggesting prudent debt management. The 20-year historical data reveals peak leverage of 0.4394 in 2009, reinforcing the significance of the recent decrease.

Current Ratio is growing?

The current ratio, defined as current assets divided by current liabilities, indicates a company's ability to pay short-term obligations. It is crucial as it reflects the liquidity and financial health of a company.

The current ratio for D.R. Horton (DHI) increased from 10.8797 in 2022 to 12.0085 in 2023. This represents an improvement in the company's liquidity and ability to cover short-term liabilities. For context, over the last 20 years, DHI's current ratio has generally been higher than the industry median. In 2023, DHI's current ratio of 12.0085 significantly surpasses the industry median of 5.5847. This trend is a positive indicator of financial health and adds 1 point to the Piotroski score.

Number of shares not diluted?

This criterion assesses whether the company is effectively managing its share capital. A reduction in the number of outstanding shares is often seen positively as it could indicate the company is buying back shares, thus returning value to shareholders.

The Outstanding Shares decreased from 351,700,000 in 2022 to 340,700,000 in 2023, leading to a decline of 11,000,000 shares. This reduction constitutes approximately a 3.13% decrease in the number of shares. Such a trend generally signals a healthy situation where a company is actively managing its share capital through shareholder-friendly actions like repurchasing shares. It can potentially increase the value of remaining shares and demonstrate the company's confidence in its future prospects. Observing the trend over the last 20 years for D.R. Horton, this is the first decrease in shares after a consistent rise since 2018 from 372,600,000 to a peak of 383,400,000 in 2018. This suggests a significant policy shift towards enhancing shareholder value through financial practices such as stock buybacks. Therefore, according to this criterion, D.R. Horton would be awarded 1 point.

Operating of D.R. Horton (DHI)

Cross Margin is growing?

Gross Margin is a measure of a company's financial health and pricing strategy. It is critical as it indicates the portion of revenue that exceeds the cost of goods sold, showing how efficiently a company produces its goods.

Comparing D.R. Horton's Gross Margins, there was a decrease from 0.3137 in 2022 to 0.2637 in 2023. This indicates a decline in profitability and operational efficiency, setting the score to 0. Historically, from 2003 to 2023, D.R. Horton’s Gross Margin has experienced fluctuations with significant lows in years like 2008 (-0.2461) and notable highs such as 2022 (0.3137). Compared to the industry median, D.R. Horton's Gross Margin is still higher than the industry median (0.244 in 2023), indicating that despite the decline, the company is managing its production costs better than many of its competitors.

Asset Turnover Ratio is growing?

Asset Turnover is a measure of a company's efficiency in using its assets to generate sales. Increasing asset turnover can indicate better efficiency.

The Asset Turnover for D.R. Horton (DHI) has decreased from 1.2316 in 2022 to 1.1269 in 2023. This is a decline, suggesting that the company has become less efficient in using its assets to generate sales. Given the trendline over the past 20 years, it's noticeable that asset turnover peaked in the earlier years (2003–2005) and has faced fluctuations. Although there's been an upward movement from 2009 onwards, 2023 marks a decrease after a peak in 2021 at 1.294. Consequently, D.R. Horton does not gain a point in this criterion since the asset turnover has not increased.