Last update on 2024-06-07

Danaher (DHR) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Danaher (DHR) Piotroski F-Score Analysis for 2023 - Final Score: 4/9. Discover insights on Danaher's profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 4

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

The analysis touches on several aspects of Danaher's (DHR) financial health using the Piotroski F-Score, which ranges from 0 to 9. Danaher scored 4 out of 9, which is below average. Key positive insights from the analysis include Danaher's positive net income, strong operating cash flow, higher operating cash flow than net income, and declining leverage. However, areas of concern include a declining ROA, diminishing current ratio, increase in shares outstanding, decreasing gross margin, and reduced asset turnover ratio. The inconsistencies in profitability, liquidity, and operational efficiency highlight mixed signals regarding Danaher's current and future financial health.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Danaher’s Piotroski Score of 4 suggests that the company is not currently one of the strongest or most undervalued investments. While the company showcases strong profitability and cash flow, other metrics raise caution about its operational and liquidity efficiency. For a conservative investor, it may be worthwhile to investigate other stocks with higher Piotroski scores that indicate better overall financial health and less potential risk.

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

Profitability of Danaher (DHR)

Company has a positive net income?

Danaher's Net Income evaluation in Piotroski's analysis is fundamental. It indicates the company's profitability, making it a key criterion for its financial strength.

Danaher (DHR) reported a net income of $4,764,000,000 in 2023, which is positive. Evaluating the historical data over the past 20 years, it's evident that Danaher has shown consistent profitability. With net income peaking at $7,209,000,000 in 2022 before tapering slightly to the current level, the trend showcases the firm’s robust financial health even amid fluctuations. Therefore, Danaher earns 1 point for having a positive net income in 2023, affirming its financial stability.

Company has a positive cash flow?

Positive operating cash flow signifies a company's ability to generate sufficient cash to sustain and grow its operations. This is a crucial metric in evaluating the firm's financial health and operational efficiency.

In 2023, Danaher's Operating Cash Flow (CFO) stands at $7,164,000,000, which is indeed positive. Over the past two decades, the company has consistently generated positive cash flow, demonstrating robust financial performance and operational stability. Notably, the operating cash flow has grown substantially from $861,544,000 in 2003 to a peak of $8,519,000,000 in 2022, before a slight decline in 2023. Despite this, the sustained positivity of the CFO firmly supports awarding this criterion 1 point, reflecting Danaher's strong cash-generating capability. This trend underscores the company's ability to reinvest in growth opportunities and return value to shareholders.

Return on Assets (ROA) are growing?

Compare the ROA of 0.0564 in 2023 with the ROA of 0.0861 in 2022. If the ROA increased in 2023 add 1 point if not set it to 0. Result: The ROA increased in 2023

The Return on Assets (ROA) for Danaher Corporation in 2023 is 0.0564, which marks a decline from the ROA of 0.0861 registered in 2022. According to the Piotroski F-Score criteria, no points are awarded in this scenario as the ROA did not show an improvement. This trend is considered negative since a declining ROA indicates that the company's efficiency in generating profits from its assets has weakened compared to the previous year. To put this into context, over the last 20 years, Danaher's ROA has seen periods of fluctuation, driven by a mix of strategic acquisitions and organic growth. In comparison, the industry median ROA has remained relatively stable, hovering around the 0.50 mark. By this metric, Danaher's recent ROA performance falls significantly below the industry median, signaling potential inefficiencies or challenges that the company faces within its operational framework. Notably, despite this dip in ROA, Danaher's operating cash flow in 2023 stands impressively at $7.164 billion, showing resilience in cash-generating capabilities. Nonetheless, improving the ROA remains critical for aligning with industry standards and ensuring long-term profitability.

Operating Cashflow are higher than Netincome?

This criterion examines if the cash flow generated from operations exceeds the net income, indicating strong earnings quality.

In 2023, Danaher (DHR) reported Operating Cash Flow of $7.164 billion, which is higher than its Net Income of $4.764 billion. This results in a score of 1 point as per Piotroski's F-Score model. Over the last 20 years, Danaher's Operating Cash Flow has demonstrated a steady upward trajectory, peaking at $8.519 billion in 2022. This trend is favorable as it suggests that the company is generating ample cash flow from its core operations, which is crucial for maintaining liquidity, funding growth initiatives, and providing shareholder returns. The consistent cash flow generation highlights Danaher's operational efficiency and robust financial health, supporting its long-term sustainability and investment appeal.

Liquidity of Danaher (DHR)

Leverage is declining?

Leverage generally refers to the ratio of a company's debt to its equity and is an indicator of financial risk.

The leverage ratio for Danaher (DHR) has decreased from 0.2354 in 2022 to 0.209 in 2023. This change is viewed positively in the context of the Piotroski Analysis, as a reduction in leverage signifies a decrease in financial risk, thereby enhancing the company’s financial stability. Reviewing the historical data, Danaher's leverage has fluctuated over the past two decades, with notable peaks in 2019 and 2015 when leverage spiked to 0.3466 and 0.2494, respectively. The recent decrease aligns with a general trend of reducing financial leverage post-2019. Thus, this criterion contributes positively to the overall Piotroski score, awarding Danaher 1 point for a reduced leverage ratio in 2023.

Current Ratio is growing?

The current ratio assesses a company's ability to pay off its short-term liabilities with its short-term assets. A higher ratio indicates better liquidity.

Danaher's current ratio decreased from 1.8933 in 2022 to 1.6844 in 2023, which does not warrant adding a point based on the Piotroski criteria. The 2023 current ratio of 1.6844 also places Danaher below the industry's 2023 median current ratio of 2.3682, showing a relatively weaker liquidity position. Historically, Danaher's current ratio has shown considerable variability, hitting a peak of 5.1898 in 2019 and a low of 0.9696 in 2016. This downward trend in 2023 indicates a decline in short-term liquidity compared to the previous year and relative to the industry.

Number of shares not diluted?

The change in shares outstanding is analyzed to determine if a company is performing buybacks to return value to shareholders.

From the data provided, Danaher's outstanding shares have increased from 725,100,000 in 2022 to 736,500,000 in 2023. This indicates that the company has not decreased its shares outstanding and thus would score 0 points for this criterion. Historically, over the past 20 years, Danaher's outstanding shares have shown both periods of increase and decrease, with the most recent trend pointing towards an increase. Given that shareholders often view buybacks favorably as a sign of value return and confidence from the company's management, the current increment trend can be viewed as less favorable from a Piotroski analysis perspective. Therefore, it is prudent to assign 0 points for this criterion.

Operating of Danaher (DHR)

Cross Margin is growing?

The Gross Margin criterion assesses profitability and efficiency by comparing current and historical figures.

For Danaher (DHR), the Gross Margin decreased from 0.6076 in 2022 to 0.5874 in 2023. Hence, no points are added. Historically, the 20-year trajectory shows significant growth, especially post-2015, compared to a fluctuating industry median, yet this recent downturn calls for scrutiny. Bad.

Asset Turnover Ratio is growing?

Asset Turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue. It considers how well the company is utilizing its assets to produce sales.

The Asset Turnover for Danaher (DHR) has decreased from 0.3181 in 2022 to 0.283 in 2023. This indicates a decline in efficiency in using its assets to generate sales in the most recent year. Historically, Danaher's Asset Turnover has been gradually declining over the past 20 years, starting from a high of 0.9041 in 2003. The consistent downward trend suggests that the company's ability to efficiently use its assets has been diminishing. Given this trend, the score for the Asset Turnover criterion is set to 0, as this decrease points towards potential inefficiencies in asset utilization.