Last update on 2024-06-07

Encavis (ECV.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Encavis (ECV.DE) 2023 financial analysis using the Piotroski F-Score. Detailed insight into profits, liquidity, cash flow, and operational efficiency with a final score of 4 out of 9.

Short Analysis - Piotroski Score: 4

We're running Encavis (ECV.DE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Encavis (ECV.DE) scored 4 out of 9 on the Piotroski F-Score, reflecting a moderate financial position. Key positive indicators include consistent profitability and cash flow, as well as an improving current ratio. Negative points were given for declining return on assets, increasing leverage, share dilution, and decreasing asset turnover and gross margin.

Insights for Value Investors Seeking Stable Income

With a Piotroski score of 4, Encavis demonstrates both strengths and weaknesses. Positive cash flow and profitability show a stable base, yet declining efficiency metrics (like ROA and asset turnover) suggest caution. The leverage increase and share dilution are red flags. Overall, this stock may be worth considering for a closer look but be aware of the risks and compare it with similar stocks in the industry.

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

Profitability of Encavis (ECV.DE)

Company has a positive net income?

The criterion checks if the net income, also known as the company's profit, is positive. Positive net income is crucial as it indicates profitability and the company's ability to generate earnings.

Encavis (ECV.DE) reported a net income of €57,998,000 in 2023, which is indeed positive. Over the last 12 years, the company has demonstrated a general uptrend in net income with some variations. Notably, there was a significant increase in net income, resulting in its highest figures in 2021 and 2022. The positive net income of €57,998,000 adds 1 point to Encavis' Piotroski score for this criterion. This trend is favorable for investors as it showcases the company's consistent ability to generate profit, despite minor fluctuations.

Company has a positive cash flow?

Positive Cash Flow from Operations (CFO) indicates that the company is generating enough cash from core activities to sustain and grow its operations.

For the fiscal year 2023, Encavis (ECV.DE) reported a positive Cash Flow from Operations (CFO) of €234.88 million. This is highly favorable as it demonstrates the company's ability to generate ample cash from its core business operations. Over the last decade, Encavis has consistently shown positive CFO, with a noticeable growth trend, peaking at €327.24 million in 2022. Such consistency not only underscores operational efficiency but also offers the potential for future reinvestments and paying down debts. This positive trend earns Encavis one point for this Piotroski criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is pivotal in evaluating a company's profitability relative to its total assets; an increase signifies better efficiency in utilizing assets.

In 2023, Encavis' (ECV.DE) ROA dropped to 0.0166 from 0.0251 in 2022, marking a decline instead of an anticipated increase. Historically, the company's ROA has been erratic but generally positive compared to its sector's median. Despite several fluctuations, Encavis has experienced years with stronger ROA values—such as 0.0251 in 2022—but has faced difficulty sustaining this trend. Industry median ROA trends (e.g. 0.45 in 2023) further highlight Encavis' struggle to match sector efficiency. Consequently, for this criterion, Encavis fails to score a point, suggesting a strategic reevaluation may be required to enhance asset productivity.

Operating Cashflow are higher than Netincome?

Operating cash flow being higher than net income

Encavis (ECV.DE) reported an operating cash flow of €234.88 million for 2023, significantly higher than its net income of €57.99 million. This difference highlights the company's robust cash generation capabilities, quite crucial in assessing the quality and sustainability of its earnings. With operating cash flow consistently outpacing net income over recent years, Encavis shows strong operational efficacy and financial health. For this criterion, 1 point is added, indicating a favorable trend.

Liquidity of Encavis (ECV.DE)

Leverage is declining?

Leverage indicates the amount of debt a company uses to finance its assets. Lower leverage is preferable as it denotes less financial risk.

The leverage ratio for Encavis increased from 0.396 in 2022 to 0.4046 in 2023, reflecting a slight rise of approximately 2.2%. This implies that Encavis has incrementally relied more on debt to finance its assets. Over the past decade, leverage has mostly been declining from a high of 0.6403 in 2015 to 0.396 in 2022, showing improving financial stability. However, the observed rise in leverage in 2023 is a shift from this trend, suggesting a marginally increased financial risk. Thus, no point is awarded for this criterion.

Current Ratio is growing?

The current ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. It's important for assessing liquidity.

The current ratio for Encavis (ECV.DE) has increased from 0.7798 in 2022 to 0.9997 in 2023. While this represents a positive trend, it is still below the industry's median current ratio of 1.2996 for 2023. Therefore, while Encavis gets 1 point for increasing its current ratio, the company is still behind its industry peers in terms of short-term liquidity. Over the last decade, the company has experienced fluctuations, with the current ratio peaking at 2.1334 in 2021 and reaching its lowest at 0.7798 in 2022. This indicates variability that stakeholders should be aware of.

Number of shares not diluted?

Change in Shares Outstanding helps investors understand if the company is issuing new shares or buying back shares. It's a critical metric for determining dilution.

The outstanding shares of Encavis increased from 160,756,644 in 2022 to 161,030,176 in 2023. This represents an increase of 273,532 shares. Given that a lower outstanding share count generally indicates less dilution and can be favorable for existing shareholders, this increase will assign this criterion a score of 0. Looking at the historical data for the past 20 years, it’s notable that there was a steady rise from 2018 onwards, reflecting frequent equity issuance likely to fuel expansion, which might not be alarming for a growth-oriented company but needs contextual financial analysis for precise interpretation.

Operating of Encavis (ECV.DE)

Cross Margin is growing?

Gross Margin Trend Analysis over time and its importance to financial performance of Encavis.

In 2023, the gross margin for Encavis slightly decreased to 0.7816 from 0.7876 in 2022, indicating a slight reduction in cost efficiency. Although it represents a setback, it is worth noting the gross margin remains significantly higher than the industry median of 0.4502. Historically, Encavis's gross margin maintained a robust performance above industry standards, suggesting a relatively stable control over its direct costs. Hence, while the downward trend might be seen as negative in this criterion for 2023, the overall performance remains strong relative to industry peers.

Asset Turnover Ratio is growing?

Asset Turnover measures how efficiently a company uses its assets to generate revenue. It is calculated by dividing revenue by average total assets. Higher values indicate greater efficiency.

The Asset Turnover ratio for Encavis has decreased from 0.1472 in 2022 to 0.1346 in 2023, attributing no positive point to this criterion. The reduction from 0.1472 to 0.1346 suggests a decline in efficiency in utilizing assets to generate revenue. Historical data also indicates some fluctuation over the years with values consistently increasing since 2016 until this downturn.