Last update on 2024-06-07

Enel (ENL.F) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

In-depth 2023 Piotroski F-Score analysis of Enel (ENL.F) revealing a final score of 6/9. Valuable insights on net income, cash flow, profitability, and liquidity.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score is a measure of a company's financial health, ranging from 0 to 9 based on 9 different criteria focusing on profitability, liquidity, and operational efficiency. Enel (ENL.F) has a Piotroski Score of 6 out of 9, indicating generally good financial strength with some areas needing improvement. Enel shows robust performance in profitability with positive net income, increasing return on assets, and high operating cash flow. Their liquidity is weaker, evidenced by a declined current ratio and a slight increase in leverage. Operationally, they show strong gross margins but also face challenges in asset turnover efficiency. Overall, Enel demonstrates strong financial fundamentals but should focus on improving liquidity and operational asset management.

Insights for Value Investors Seeking Stable Income

As an investor, Enel (ENL.F) seems like a solid option due to its strong profitability and operational cash flow. The company's financial position is robust, although its liquidity and asset management efficiency need some attention. With a Piotroski Score of 6, Enel is fundamentally sound and worth considering for long-term investment, particularly if they address their liquidity and asset turnover issues in the coming years.

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

Profitability of Enel (ENL.F)

Company has a positive net income?

The criterion assesses if the net income for Enel (ENL.F) is positive. Positive net income is crucial as it indicates profitability.

For the fiscal year 2023, Enel reported a net income of €3,438,000,000. This is a substantial figure and thus we can confidently assign 1 point for this criterion. Observing the historical net income dataset, Enel has generally maintained a positive net income over the last 20 years, with only a few fluctuations. This trend favorably highlights Enel's ability to generate profits consistently, signifying robust financial health.

Company has a positive cash flow?

Evaluating Enel's cash flow from operations (CFO) to ensure it is positive, as this indicates the company's core business is generating sufficient cash to maintain or expand operations.

Enel (ENL.F) has reported a Cash Flow from Operations of €14.62 billion for the year 2023. This represents a positive cash flow and thus adds 1 point to its Piotroski Score. Over the past 20 years, Enel’s CFO has seen fluctuations but generally tends to stay positive, indicating strong operational consistency. For instance, the CFO peaked in 2008 at approximately €14.63 billion and reached its minimum in 2005 at around €6.7 billion. The recent CFO resurgence to peak values suggests improving operational efficiencies and business health, reinforcing a positive outlook.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures how efficiently a company can manage its assets to produce profits during a period. It is significant to investors seeking to understand a company's profitability and efficiency.

Enel's ROA increased from 0.0079 in 2022 to 0.0166 in 2023, reflecting an improvement in asset utilization and profitability. Recording a 1 point for this increase in the Piotroski score reflects positively. Compared to the industry median ROA, which ranged from ~0.4569 to ~0.3416 over the past 20 years, Enel's ROA remains below the industry standard, indicating room for further efficiency improvements. Nevertheless, the increase signals a step in the right direction.

Operating Cashflow are higher than Netincome?

This criterion examines whether a company's Operating Cash Flow (OCF) exceeds its Net Income. It is vital because OCF is a more accurate reflection of the cash-generating ability of a company's core operations, while Net Income can be influenced by non-cash items and accounting policies.

Enel's (ENL.F) Operating Cash Flow in 2023 was €14.62 billion, significantly higher than its Net Income of €3.44 billion. This indicates strong operational health as OCF is a better gauge of earnings quality and sustainability. Over the last 20 years, OCF has generally been higher than Net Income, except in a few cases. For instance, in 2013 and 2014, the gaps between OCF and Net Income were narrow (OCF of €9.98 billion vs Net Income of €4.46 billion in 2013 and OCF of €12.17 billion vs Net Income of €625 million in 2014), which raised some concerns. In contrast, the 2023 figure being substantially higher (OCF of €14.62 billion) suggests improved efficiency in managing cash operations. This criterion thus yields a point, highlighting Enel's strong capability to generate cash over reported earnings. With consistent positive OCF trends over the years, Enel proves to be operationally robust, making it an attractive prospect for long-term investors. Additionally, the low accrual ratios over the years (average of approx. 0.06) further illustrate the quality of Enel's earnings.

Liquidity of Enel (ENL.F)

Leverage is declining?

Change in Leverage measures how a company's debt levels have adjusted relative to its equity. Reduced leverage indicates improving financial stability and reduced risk.

Enel's leverage has slightly increased from 0.3101 in 2022 to 0.3129 in 2023. This indicates a minor increase in debt relative to equity. Historically, Enel's leverage has fluctuated, peaking at 0.4215 in 2007 and generally showing an improving trend. In this criterion, since the leverage has increased, Enel scores 0 points.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. It is a key indicator of a company's liquidity and is crucial to determining financial health.

In 2023, Enel's Current Ratio is 0.8549, down from 0.9545 in 2022, indicating a decrease. This is a negative trend for liquidity health as it suggests that Enel has a relatively lower ability to cover short-term liabilities with short-term assets compared to the previous year and relative to the industry median of 0.8538. For Enel's liquidity analysis, this earns 0 points.

Number of shares not diluted?

The change in shares outstanding is pivotal for investors as it can affect the ownership percentage, EPS, and share prices. A decline may indicate buybacks while an increase often signals dilution.

Upon comparing the outstanding shares, 10,160,538,038 shares in 2022 and 10,159,406,558 shares in 2023, it is evident that there was a slight decrease in shares outstanding by approximately 1 million. This implies a share buyback which can be positive as it often signals company confidence and return of capital to shareholders. Given the long-term trend, this is a relatively rare occurrence over the past 20 years, suggesting a strategic decision to enhance shareholder value. Hence, 1 point is awarded for this criterion.

Operating of Enel (ENL.F)

Cross Margin is growing?

Gross Margin represents the percentage of total revenue that the company retains as profit after incurring the direct costs associated with producing goods and services. For Enel (ENL.F), an increase in Gross Margin signifies improved cost efficiency and profitability.

In 2023, Enel's Gross Margin improved significantly to 0.3412 from 0.1618 in 2022, doubling its profitability metric. This upward trend is favorable and contributes positively to the Piotroski score. Historically, Enel's Gross Margin fluctuated but generally remained below the industry median. In 2023, Enel closed the gap, nearing the industry median of 0.3416. A Gross Margin boost suggests notable operational efficiency gains or reduced cost pressures, translating to a stronger competitive position. Therefore, adding 1 point in this criterion is justified and indicates a positive trend.

Asset Turnover Ratio is growing?

The criterion assesses if Enel's efficiency in using its assets to generate revenue has improved. Increased efficiency can indicate better performance and asset management.

Enel's Asset Turnover has decreased from 0.6357 in 2022 to 0.4475 in 2023, yielding a decrease of 29.6%. Over a 20-year period, historical data shows a fluctuation, with recent years (2019 to 2023) generally exhibiting lower ratios compared to earlier years like 2006. Therefore, no point is added under this criterion for 2023.