Last update on 2024-06-05

Devon Energy (DVN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Analyze Devon Energy's (DVN) Piotroski F-Score for 2023 with a final score of 5/9, highlighting financial metrics like profitability, liquidity, and leverage.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score helps investors find strong, undervalued stocks by evaluating profitability, liquidity, and efficiency on a scale of 0 to 9. Devon Energy (DVN) has a Piotroski Score of 5, indicating a mixed financial position. The analysis checks several criteria including profitability, liquidity, leverage, and efficiency to derive the score.

Insights for Value Investors Seeking Stable Income

Based on Devon Energy's Piotroski Score of 5, it has an average financial position. Positive aspects include strong net income, positive cash flow, and no share dilution. However, concerns are raised due to declining ROA, leverage increase, and reduced liquidity. Investors might want to keep an eye on the company's management of debt and operational efficiency before making an investment decision.

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

Profitability of Devon Energy (DVN)

Company has a positive net income?

Examine if the net income of Devon Energy is positive to gauge profitability.

The net income for Devon Energy (DVN) in 2023 is $3.747 billion, signifying profitability. This contributes 1 point to the Piotroski Score, reflecting a positive performance. Historically, the net income trend shows volatility, with significant losses in years like 2008 and 2015. However, recent figures indicate a strong comeback, particularly with net incomes of $2.813 billion in 2021 and $6.015 billion in 2022. This resurgence is crucial for attracting investors and indicates the company's robust financial health. Therefore, this trend is favorable, evidencing coherent management and operational efficiencies.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects the amount of cash a company generates from its regular operating activities. A positive CFO is crucial as it indicates the company can generate sufficient cash flow to maintain and grow its operations without relying on external financing.

The CFO for Devon Energy (DVN) in 2023 is $6,544,000,000, which is positive. This is a good sign as it shows strong cash generation from the company's core operations. In fact, over the past 20 years, Devon Energy has consistently generated positive cash flows from operations, except for the lower inflows seen in 2016 and 2020. The trend illustrates robust operational efficiency and capacity to sustain business activities through internally generated cash. Comparing these numbers, the current CFO is higher than the long-term average, further highlighting the company's strong performance. As a result, we can confidently add 1 point for this criterion, reinforcing Devon Energy's solid operational cash flow management.

Return on Assets (ROA) are growing?

Change in ROA measures the difference in Return on Assets (ROA) between two consecutive years, indicating how efficiently a company is utilizing its assets to generate earnings. It is crucial for evaluating operational competency and managerial effectiveness over time.

In 2022, Devon Energy (DVN) had a Return on Assets (ROA) of 0.2689. However, this ROA declined to 0.1554 in 2023. Hence, we need to assign 0 points for this criterion, as the ROA did not increase. This declining trend may evoke concern, considering the essential nature of ROA in portraying asset usage efficiency. Over the last 20 years, DVN's ROA fluctuated significantly, aligning occasionally with the industrial median ROA - which itself has had notable lows especially during 2009 and 2015's industry-level recessions. As the energy sector can be volatile, influenced by cyclical market demands, and operational challenges, the recent decline can reflect the industry's broader downswing. This drop mirrors the industry's conditions from the provided 20 years data.

Operating Cashflow are higher than Netincome?

Operating Cash Flow (OCF) higher than Net Income is a sign of good financial health as it shows that the company can generate cash from its operations over its accounting profit.

For the fiscal year 2023, Devon Energy (DVN) reported an Operating Cash Flow (OCF) of $6.544 billion and a Net Income of $3.747 billion. Since the Operating Cash Flow is indeed higher than the Net Income, we award 1 point in this criterion. Looking at the trend for the past 20 years, the OCF has shown notable fluctuations, reflecting the cyclicality and volatility typical of the energy sector. For instance, in 2008 the OCF peaked at $9.408 billion while the net income was a loss at -$2.148 billion, reflecting significant non-cash expenses or writedowns. In most recent years, the notable rise in the OCF compares favorably with net income, suggesting a solid capacity for generating operational cash. This is a positive signal for investors, indicating a robustness in operational efficiency and liquidity sustainability.

Liquidity of Devon Energy (DVN)

Leverage is declining?

Examines if a company is positively shifting towards less leverage, which signals reduced financial risk and an improved ability to meet its obligations.

Based on the data, Devon Energy's leverage has slightly increased from 0.2437 in 2022 to 0.2717 in 2023, indicating a trend towards higher debt levels. This is seen as a mildly negative indication as leverage moving higher can signal increased financial risk. Historically, the company's leverage has seen substantial fluctuations, reaching as high as 0.4584 in 2020 and lowering impressively since. However, this recent uptick reminds investors to watch the company's debt-management policies closely.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. A higher ratio indicates better liquidity and financial health.

The Current Ratio for Devon Energy (DVN) has decreased from 1.2531 in 2022 to 1.0705 in 2023. This suggests a reduction in the company's liquidity position over the past year. Usually, a higher Current Ratio reflects better ability to cover short-term debts with short-term assets. In this case, the decrease is not favorable. Furthermore, it's notable that DVN's Current Ratio in 2023 is below the 2023 industry median of 1.1065, emphasizing a weaker liquidity condition relative to peers. Hence, for Piotroski analysis, the score for this criterion would be 0.

Number of shares not diluted?

Change in Shares Outstanding measures the number of shares a company has issued and is crucial for equity valuation.

In 2022, Devon Energy had 651,000,000 outstanding shares, which decreased to 639,000,000 in 2023. This reduction in shares is positive, as it signifies a decrease in share dilution and can result in higher earnings per share (EPS) for existing shareholders. Given this trend, Devon Energy would score 1 point in this criterion. Analyzing the historical data over the last 20 years, Devon Energy's outstanding shares fluctuated, reaching its peak in 2021 with 663,000,000 shares. The decrease in 2023 follows the recent spike, potentially signaling improved capital efficiency.

Operating of Devon Energy (DVN)

Cross Margin is growing?

Gross Margin is the ratio of a company's gross profit to its revenue, indicating how efficiently it is producing its goods. A higher ratio indicates better efficiency.

For the year 2023, Devon Energy's Gross Margin has declined to 0.3517 from 0.4366 in 2022. This decrease indicates that the company has become less efficient in converting revenue into gross profit compared to the previous year. According to the Piotroski F-Score, this decrease means that no point would be added for this criterion. Over the last 20 years, Devon Energy's Gross Margin has also often been above the industry median, showcasing intermittent periods of superior efficiency compared to its peers. However, the recent decline is a concerning factor for profitability.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. A higher ratio signifies better performance.

The Asset Turnover for Devon Energy in 2023 was 0.633, a decrease from 0.8568 in 2022. This marks a negative trend as the company is less efficient in using its assets to generate sales, scoring 0 points. Over the past 20 years, the Asset Turnover has largely improved, peaking in 2022 but declining in 2023.