Last update on 2024-06-06

Edison (EIX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Detailed Piotroski F-Score analysis for Edison (EIX) in 2023, with a final score of 6/9. Review covers profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 6

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

We analyzed Edison International (EIX) using the Piotroski F-Score, which ranges from 0 to 9 to gauge a company's financial health. Edison scored a 6, suggesting it has a relatively strong financial position but with room for improvement. Key areas of strength include positive net income, cash flow, return on assets, operating cash flow, current ratio, and gross margin. However, the company faces challenges such as increasing leverage, higher outstanding share count, and a decline in asset turnover.

Insights for Value Investors Seeking Stable Income

Edison International (EIX) shows a solid financial foundation based on its Piotroski Score of 6, indicating it may be a good investment opportunity. The consistent positive cash flow and profitability are promising. However, potential investors should be cautious about the company's increasing debt and higher share dilution, as these factors can pose risks. Overall, it is worth considering for investment but warrants closer monitoring of the leverage and share count trends.

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

Profitability of Edison (EIX)

Company has a positive net income?

Net income represents the company's profitability. A positive net income indicates that the company is generating profit after all expenses are deducted.

For the fiscal year 2023, Edison International (EIX) reported a net income of $1,407,000,000. This positive net income demonstrates that the company is indeed profitable. Notably, the company has experienced some fluctuations in net income over the last two decades. There were years, such as 2011, 2012, and 2018, when the net income was negative, which might have been reflective of operational challenges or extraordinary expenses. Despite these challenges, the consistent net positive income in recent years, particularly from 2019 onwards, signifies financial stability and effective cost management strategies. Therefore, for this Piotroski criterion, Edison International scores 1 point.

Company has a positive cash flow?

Cash Flow from Operations (CFO) assesses the cash inflow from the regular business operations of the company. It's crucial to determine the liquidity and operational health of the firm.

For Edison (EIX), the Cash Flow from Operations (CFO) in 2023 stands at $3,401,000,000, which is positive. This not only earns the company 1 point under the Piotroski Analysis but underscores a robust operational inflow, indicating healthy core business activities. Historically, examining the last 20 years of CFO data, Edison has experienced fluctuations, such as the negative CFO recorded in 2018. Nevertheless, the positive trend in recent years, culminating in the significant $3.4 billion in 2023, bodes well for the company's financial stability. It showcases the firm has consistently generated sufficient cash to cover its everyday operating expenses and potentially fund investments or distributions, portraying a sound financial position.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's profitability relative to its total assets. A higher ROA indicates more efficient asset utilization, leading to higher profitability. An increase in ROA suggests improved operational performance.

Edison's Return on Assets (ROA) increased from 0.0108 in 2022 to 0.0176 in 2023. This upward trend is positive, contributing 1 point to the Piotroski score. The improvement in ROA indicates that Edison has enhanced its efficiency in using assets to generate profits. However, when compared to the industry median ROA of 0.4109 in 2023, Edison's ROA remains substantially lower, highlighting room for improvement in asset utilization. Over the past 20 years, Edison's ROA has fluctuated, but the recent increase is a positive sign. Coupled with the increase in operating cash flow from -$307 million in 2018 to $3.401 billion in 2023, this trend showcases a strengthening financial position.

Operating Cashflow are higher than Netincome?

This criterion looks at whether a company's Operating Cash Flow is higher than its Net Income for the same period.

In 2023, Edison (EIX) reported an Operating Cash Flow of $3,401,000,000 compared to a Net Income of $1,407,000,000. The Operating Cash Flow being significantly higher than the Net Income is a positive trend. Specifically, the Operating Cash Flow exceeds the Net Income by nearly $2 billion. This means that Edison is generating ample cash from its core operations, which is a strong indicator of its financial health and operational efficiency. Investors tend to prefer companies where cash flow provides a better picture of financial performance over net income, as it is less susceptible to accounting manipulations. Thus, this criterion adds 1 point to Edison’s Piotroski Score.

Liquidity of Edison (EIX)

Leverage is declining?

Change in Leverage evaluates the year-over-year change in financial leverage, which measures the proportion of debt used in the firm's capital structure. This criterion is critical for understanding a firm's risk level.

For Edison (EIX), the Leverage has increased from 0.3583 in 2022 to 0.3843 in 2023, indicating a higher reliance on debt financing. Increasing leverage can signify that the company is taking on more debt, potentially raising financial risk. This trend is negative, and therefore, the score for this criterion is 0. Reviewing historical data: Leverage has generally been increasing over recent years, reinforcing the trend towards higher financial risk.

Current Ratio is growing?

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

As of 2023, Edison’s current ratio is 0.7922 compared to 0.6833 in 2022. This represents an increase in the current ratio, reflecting improved liquidity. Given that the industry median current ratio stands at 0.7878 in 2023, Edison’s current ratio of 0.7922 is slightly above the industry median. This improvement suggests that Edison has enhanced its ability to cover short-term liabilities with assets over the last year, moving from a ratio below the industry median to just slightly above it, indicating a positive liquidity trend. Therefore, EIX scores 1 point for this criterion.

Number of shares not diluted?

The criterion evaluates whether Edison (EIX) reduced its outstanding shares, which is seen positively as it often indicates share buybacks, reflecting company confidence in its own financial health and a potential increase in shareholder value.

For Edison (EIX), the Outstanding Shares have increased from 381,000,000 in 2022 to 383,000,000 in 2023. The increase in outstanding shares results in 0 points for this criterion. The trend in recent years shows a general increase: shares rose from 326,000,000 in 2018 to 383,000,000 in 2023. This consistent increase might indicate continued raising of capital potentially for leverage or new ventures. An increasing trend might concern shareholders if unable to yield significant returns. Thus, adding or maintaining shares in recent years is a trend that should be carefully monitored.

Operating of Edison (EIX)

Cross Margin is growing?

This criterion compares the company's gross margin year-over-year to gauge whether operational efficiency and profitability are improving.

Edison (EIX) has shown an increase in its gross margin from 0.3555 in 2022 to 0.4109 in 2023, indicating an improvement. This is positive for the company, adding 1 point to its Piotroski Score. Additionally, comparing the 20-year historical data of Edison's gross margin against the industry median reveals fluctuating but generally favorable performance. In 2023, Edison's gross margin matches the industry median, which strengthens its competitive positioning in the market. Thus, the current trend is good as it reflects better profitability and operational efficiency.

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. This metric indicates how well a company is deploying its assets to produce revenue. It is calculated by dividing total sales by average total assets.

In 2023, Edison (EIX) reported an Asset Turnover of 0.2045, compared to 0.2254 in 2022. This represents a decrease in efficiency, contradicting the given statement that the Asset Turnover has increased. Reviewing the long-term data, EIX’s Asset Turnover has seen a fluctuating trend over the past 20 years. For example, in 2018 the ratio was 0.2232 but it dropped to 0.2039 in 2019. Currently, the figure in 2023 stands almost midway compared to its historical highs and lows. Therefore, the point for this criterion should be set to 0, suggesting a decrease in Asset Turnover in 2023.