Last update on 2024-06-06

EOG Resources (EOG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Explore Piotroski F-Score analysis for EOG Resources (EOG) in 2023. A detailed financial assessment on profitability, liquidity, and leverage with a final score of 6/9.

Short Analysis - Piotroski Score: 6

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

EOG Resources (EOG) has been evaluated using the Piotroski F-Score system which rates the company's financial position on a scale from 0 to 9. EOG scored a 6, indicating a relatively strong but not perfect financial status. The company is profitable with a positive net income of $7.594 billion for 2023 and a high operating cash flow of $11.34 billion. However, it has witnessed a decline in its Return on Assets (ROA) from 0.1949 in 2022 to 0.1782 in 2023. Its leverage has decreased, and the current ratio has improved, indicating better liquidity. EOG's number of shares has slightly declined, and it managed to maintain a strong gross margin relative to the industry despite a minor decrease. On the downside, the asset turnover ratio has dropped, suggesting reduced efficiency in asset utilization.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, EOG Resources (EOG) demonstrates a solid financial position and effective management in several key areas such as profitability and liquidity. However, the drop in Return on Assets and Asset Turnover Ratio indicate some areas for concern and suggest the need for further investigation. Overall, EOG presents a reasonably strong investment potential but with noted caution due to declining efficiency metrics. It might be worth looking into for investors who are willing to balance solid financial health with the risks of fluctuating returns on assets and turnover efficiency.

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

Profitability of EOG Resources (EOG)

Company has a positive net income?

Net income measures a company's total earnings or profit, crucial for assessing financial health.

For EOG Resources (EOG), the net income for the year 2023 is $7.594 billion, indicating a positive earnings number, which adds 1 point to the Piotroski score. Historically, EOG's net income showcases significant fluctuations with notable dips in 2015 and 2016. Overall, the positive net income this year reaffirms a profitable phase, demonstrating robust financial performance amidst past volatility.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is the cash generated by a company's regular business operations. It is essential as it shows whether a company can generate enough positive cash flow to maintain and grow its operations.

EOG Resources' CFO for 2023 is $11.34 billion, which is positive. Over the last 20 years, EOG Resources has consistently maintained a positive CFO, significantly improving over the years. The lowest CFO in the past 20 years was in 2016 at $2.36 billion, and it has steadily increased since then. This positive trend in CFO is a good indicator of the company's operational efficiency and its ability to generate sufficient cash from its core business activities. Therefore, this criterion is met with a score of 1 point.

Return on Assets (ROA) are growing?

This criterion compares the Return on Assets (ROA) from one fiscal year to the next to assess profitability growth.

The ROA for EOG Resources (EOG) was 0.1782 in 2023, down from 0.1949 in 2022. This decline in ROA is concerning as it indicates that the company's profitability relative to its total assets has decreased. Given that this criterion did not meet the requirement for an increased ROA, EOG earns 0 points in this category. Additionally, looking at a broader historical perspective, EOG has had fluctuations in its operating cash flow, which impacts the ROA metrics. Compared to the industry median ROA for each of the past 20 years, EOG’s recent ROA figures stand below the industry benchmark, signifying potential challenges in asset utilization and returns.

Operating Cashflow are higher than Netincome?

Whether the operating cash flow (OCF) exceeds net income

For EOG Resources, the operating cash flow for 2023 is $11.34 billion, while the net income is $7.594 billion. Since the OCF is significantly higher than the net income, we add 1 point. Historically, EOG Resources has demonstrated robust operating cash flow, which is indicative of good financial health. Over the last twenty years, the operating cash flow has been greater than the net income more often than not. This trend is a positive indicator for investors because consistent strong cash flow underpins the company's ability to fund operations, invest in growth, and return value to shareholders.

Liquidity of EOG Resources (EOG)

Leverage is declining?

Change in Leverage criteria assesses whether a company's scale of borrowing has increased or decreased.

The Leverage for EOG Resources has increased from 0.1058 in 2022 to 0.1013 in 2023. Since the leverage has decreased in 2023, we add 1 point. Observing the last 20 years of leverage, it becomes clear that EOG Resources has experienced remarkable volatility, with a spike in leverage around 2011 at 1.0419 and a significant decrease post-2015, ultimately reaching current low levels. The reduction in leverage signifies sound financial management and lower dependence on debt financing, which is a positive indicator for long-term stability and shareholder value. This trend of decreasing leverage underscores EOG Resources' effort in mitigating financial risk.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay its short-term obligations with its short-term assets. It is crucial for assessing liquidity.

The Current Ratio of EOG Resources (EOG) increased from 1.9001 in 2022 to 2.4386 in 2023, which is a favorable trend. This signifies that EOG has a stronger liquidity position, enhancing its ability to cover short-term liabilities. Historically, EOG's Current Ratio has shown variability, but the latest ratio is significantly above the industry median of 1.1065 in 2023, indicating a robust short-term financial position. This positive change results in adding 1 point for this criterion in the Piotroski Analysis.

Number of shares not diluted?

The Change in Shares Outstanding criterion examines if a company has reduced its shares overall, signalling potential strong financial health.

In 2022, EOG Resources had outstanding shares of 583,000,000, which decreased to 581,000,000 in 2023. This slight reduction hints at the company's efforts in potentially buying back shares, aiming to improve overall shareholder value and earnings per share. Historically, EOG's shares have fluctuated, but recent declines indicate a trend toward consolidation. This analysis qualifies for a score of 1, signalling a positive trend according to Piotroski's criteria.

Operating of EOG Resources (EOG)

Cross Margin is growing?

Change in Gross Margin evaluates the difference in Gross Margin from one year to the next and measures profit efficiency.

When reviewing the Gross Margins for EOG Resources, we find they experienced a slight decrease from 0.8137 in 2022 to 0.758 in 2023. This indicates a lowering in profit efficiency, but the 2023 Gross Margin remains robust compared to the industry's median, which is 0.4978 for the same year. Although a lower Gross Margin may initially appear negative, the competitive comparison shows EOG maintaining a strong position.

Asset Turnover Ratio is growing?

Asset turnover measures the efficiency of a company's use of its assets to generate sales revenue.

EOG Resources' asset turnover ratio decreased from 0.7409 in 2022 to 0.544 in 2023, indicating less efficiency in converting its assets into revenue. This decline is concerning as it suggests a reduced effectiveness in asset utilization. Reviewing long-term data, it's evident that fluctuations are common, but the recent drop necessitates further investigation. Chart reference: [Year: {'values': ['2003', ....]}]