Last update on 2024-06-06

Equifax (EFX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Equifax (EFX) Piotroski F-Score Analysis 2023: Thorough review revealing a final score of 4/9, indicating company profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 4

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

Equifax (EFX) currently has a Piotroski F-Score of 4 out of 9, which reflects a mixed but relatively weak financial position. The analysis shows that EFX is profitable with positive net income and cash flow. However, their Return on Assets (ROA) has decreased, indicating efficiency issues. The company generates strong operating cash flow compared to net income, but some liquidity challenges are present as the current ratio has slightly declined. Leverage has improved, but the number of shares has slightly increased, and the asset turnover and gross margin have both decreased year-over-year.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, Equifax exhibits both strengths and weaknesses in its financial health. EFX demonstrates good profitability and cash flow, which are positive indicators for potential investors. However, the deteriorating ROA, declining efficiency ratios, and slight liquidity worries should not be ignored. Potential investors might want to further investigate the reasons behind declining efficiencies and consider these factors before making an investment decision in EFX. While it's not a clear strong buy, EFX still might be worth a closer look for those who can tolerate moderate risk.

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

Profitability of Equifax (EFX)

Company has a positive net income?

Net income is a crucial indicator representing the company's profitability over a specific period. A positive net income generally indicates a profitable business.

The net income for Equifax (EFX) in 2023 stands at $545,300,000. This figure is positive, thereby earning 1 point in the Piotroski analysis. Referring to historical data, this continues a trend of consistent profitability for Equifax, except for 2018 where the company faced a net loss of $398,800,000. The company's rebound since 2019, recovering to $520,100,000 in 2020 and reaching $744,200,000 in 2021, underscores strong financial resilience.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company's regular business operations and indicates its ability to generate sufficient cash flow to maintain and grow its operations.

Equifax (EFX) has posted a positive Cash Flow from Operations of $1.1168 billion in 2023. This is a critical indicator of financial health, showcasing the company's ability to generate cash from its core business activities. The positive CFO receives a 1 point in the Piotroski score. Historical data further reinforces this positive trend. Upon analyzing the cash flow over the past 20 years, it's clear that Equifax has generally maintained a positive operating cash flow, except for a few fluctuations. The lowest CFO was in 2019 with $313.8 million, but it has since recovered impressively, exceeding $1 billion consistently in recent years. Such a trend indicates a resilient and stable operation.

Return on Assets (ROA) are growing?

Return on Assets (ROA) represents how efficiently a company is using its assets to generate earnings. It's an important profitability metric as it shows how well the company transforms its investments into profit. Comparing the ROA year-over-year helps in assessing whether the company's financial performance is improving or deteriorating.

For Equifax (EFX), the ROA has decreased from 0.0616 in 2022 to 0.0458 in 2023. This means we set the score to 0. A reduced ROA indicates a drop in the company's efficiency and profitability, which is not a good trend. When contextualized with the last 20 years of ROA data, we can see fluctuations with a high especially in recent years like 2021 (0.054) indicating that recent economic conditions or company-specific factors might be contributing to a variable efficiency.During the same period, the industry median ROA demonstrates a relatively stable trend compared to EFX's ROA, and both exhibit similar tendencies.

Operating Cashflow are higher than Netincome?

The criterion compares the company's operating cash flow to its net income. It's important because operating cash flow represents the real cash generated by the company's core operations while net income includes various accounting adjustments.

For Equifax (EFX) in 2023, the operating cash flow was $1,116,800,000 whereas the net income was $545,300,000. Since the operating cash flow is higher, we assign 1 point. This comparison is favorable as it indicates that Equifax is generating substantial cash from its operations beyond the accounting profits. Over the last 20 years, it's evident that operating cash flow has seen fluctuations but maintained growth in the long term, further validating the Company's powerful cash-generating capabilities.

Liquidity of Equifax (EFX)

Leverage is declining?

Change in leverage compares the company's financial leverage year-over-year and is essential for understanding debt level trends.

From 2022 to 2023, Equifax's leverage ratio decreased from 0.4174 to 0.3866. This reduction indicates a slight improvement in the company's capital structure as it relies less on debt. Reviewing historical data, the leverage trend shows considerable fluctuation throughout 20 years, hitting a low of 0.0971 in 2006 and a peak of 0.4273 in 2019. This recent decrease is positive and earns 1 point in the Piotroski Score, reflecting a stronger financial position.

Current Ratio is growing?

The Change in Current Ratio criterion examines a company's short-term liquidity by comparing the current year's ratio to the previous year's ratio.

For Equifax (EFX), the Current Ratio slightly decreased from 0.6801 in 2022 to 0.6718 in 2023, resulting in a score of 0 for this criterion. Over the past 20 years, EFX's Current Ratio has fluctuated significantly, reaching its lowest point in 2021 at 0.4892, with notable volatility compared to the industry's median, which remained above 1.0 throughout. This persistent deviation from the industry median suggests potential liquidity challenges for EFX. Therefore, this decline in the most recent year reinforces concerns about short-term financial stability.

Number of shares not diluted?

Change in Shares Outstanding reflects whether a company is buying back shares, which can be a signal of strong financial health and confidence from the management.

In 2023, Equifax (EFX) reported 122.9 million outstanding shares, a slight increase from 122.4 million shares in 2022. This uptick translates into a 0.41% rise in the shares outstanding year-over-year. Consequently, EFX does not earn a point in this Piotroski criterion, scoring 0 instead of 1. Historically, EFX has gradually decreased its shares outstanding over the last two decades, with a higher count seen in the year 2003 at 136.7 million. Therefore, this recent increase interrupts an overall downward trajectory. While a slight uptick may not be alarming, a consistent rise in share count over multiple periods could weaken shareholder value.

Operating of Equifax (EFX)

Cross Margin is growing?

Gross Margin, calculated as Gross Profit divided by Revenue, reflects the proportion of revenue that exceeds the cost of goods sold (COGS). It is crucial as it indicates the efficiency of a company in managing its production costs relative to revenues.

For Equifax (EFX), the Gross Margin in 2023 was 0.5565, compared to 0.5749 in 2022. This indicates a decrease, with the margin dropping by 0.0184. Thus, we assign 0 points for this criterion under the Piotroski F-Score method. Over the last 20 years, Equifax's Gross Margin has shown variability, peaking at 0.6668 in 2015 and declining since then. The industry median Gross Margin also showed fluctuations but aligned with Equifax's margin of 0.5565 in 2023. This trend shows the need for Equifax to enhance its cost management strategies to remain competitive.

Asset Turnover Ratio is growing?

Asset turnover is an efficiency ratio that measures how effectively a company uses its assets to generate sales. A higher ratio indicates better performance.

In 2022, Equifax had an asset turnover ratio of 0.4535, which dropped to 0.4419 in 2023. This decrease of 0.0116 indicates a decline in efficiency, suggesting the company generated less revenue per dollar of asset in 2023. Historically, the asset turnover has been on a downward trend over the past 20 years, dropping from 0.8009 in 2003. The most recent data continues this trend, signaling potential challenges in asset utilization for Equifax. With a decrease in asset turnover, Equifax scores 0 points based on the Piotroski F-Score criterion for asset turnover improvements.