Last update on 2024-06-06

Equinix (EQIX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Discover Equinix's (EQIX) 2023 Piotroski F-Score analysis. See how EQIX scored 7/9, indicating a robust financial position driven by profitability, liquidity, and leverage.

Short Analysis - Piotroski Score: 7

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

Equinix (EQIX) achieved a Piotroski F-Score of 7 out of 9, indicating a strong financial position. The company shows favorable profitability trends with positive net income and cash flow from operations. Its return on assets and gross margin are improving, and it has managed to decrease its leverage and increase its asset turnover ratio. However, EQIX's current ratio has decreased, suggesting potential liquidity risks, and it has reported an increase in the number of outstanding shares, possibly leading to dilution concerns.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 7, Equinix appears to be a financially strong company with good operational efficiency and profitability. Despite some concerns regarding its current ratio and share dilution, the overall trend is positive. This makes Equinix worth considering for investment, but potential investors should monitor the liquidity and share dilution trends closely.

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

Profitability of Equinix (EQIX)

Company has a positive net income?

Net income measures a company's profitability and is a critical indicator of financial health. Positive net income generally allows a company to reinvest in operations, pay expenses, and provide returns to shareholders.

Equinix (EQIX) achieved a positive net income of $969,178,000 in 2023. Historically, the company has shown a trend of increasing net income over the past two decades, with some respectable spikes particularly post-2015. From 2003 onwards, Equinix had intermittent years of negative income, but starting from 2008, it managed to largely remain in the positive financial territory. In light of this, the net income for 2023 indicates a robust upward trend in profitability, granting it 1 Piotroski point. This trend is favorable and reflects well on the company’s financial trajectory and operational efficiency.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company’s regular business operations. Positive CFO indicates healthy business operations as it shows the company’s capability to generate sufficient cash to maintain and grow its operations.

For Equinix (EQIX), the Cash Flow from Operations for 2023 is $3,216,595,000, which is positive. This indicates a robust ability of the company to generate cash from its operating activities. Historically, Equinix has shown consistent growth in its CFO over the last 20 years, moving from negative CFO in 2003 to over $3.2 billion in 2023. This sustained upward trend showcases strong operational efficiency and financial health. Therefore, Equinix should receive a point for this criterion, reflecting a positive assessment.

Return on Assets (ROA) are growing?

Change in ROA looks at the current year's return on assets compared to the previous year. If ROA increases, it indicates improving efficiency in asset utilization.

The ROA for Equinix (EQIX) increased from 0.0242 in 2022 to 0.0308 in 2023, which is a positive trend. This improvement indicates that Equinix has become more effective at generating profit from its assets. Historically, EQIX's operating cash flow has also shown a consistent upward trend over the last 20 years, moving from -$17.27 million in 2003 to $3.22 billion in 2023. However, it's important to note that its ROA is still considerably lower compared to the industry median ROA, which was 0.4759 in 2023. Hence, while the trend is positive, Equinix still has significant room for improvement in asset efficiency relative to its peers.

Operating Cashflow are higher than Netincome?

Operating Cash Flow compared to Net Income gauges the quality of a company's earnings. Higher Operating Cash Flow indicates robust, high-quality earnings.

For the fiscal year 2023, Equinix reported an impressive Operating Cash Flow of $3,216,595,000, significantly surpassing its Net Income of $969,178,000. This comparison yields a positive result for Equinix, indicating a high-quality earnings profile. Over the last two decades, there has been a consistent upward trend in Operating Cash Flow, which underscores the firm’s strengthening cash generation capabilities. The value for 2023 is notably higher compared to the $1,944,608,000 recorded just a decade ago. This upward trajectory demonstrates the firm’s efficiency in managing cash operations, making it a crucial marker for long-term sustainability and investor confidence. Given this trend, Equinix indeed earns a point for having an Operating Cash Flow higher than its Net Income in 2023.

Liquidity of Equinix (EQIX)

Leverage is declining?

Leverage measures the amount of debt used to finance a company's assets. A decrease in leverage is generally seen as a positive signal, showing the firm's movement towards a more stable financial position.

The leverage for Equinix decreased from 0.5334 in 2022 to 0.4955 in 2023, achieving a reduction in its leverage ratio. This is significant as a lower leverage suggests reduced reliance on debt for financing, which can be a positive indicator of financial health. Over the last 20 years, Equinix's leverage has varied, but this recent decline follows an upward trend from 2019 to 2022, indicating strategic improvements in reducing debt and managing financial stability. Thus, Equinix scores 1 point on this criterion.

Current Ratio is growing?

Explain the criterion for Equinix (EQIX) and why it is important to consider

The Current Ratio for Equinix (EQIX) in 2023 is markedly lower at 1.1282 compared to its 2022 value of 1.798, thus indicating a decrease. This change is significant as a current ratio below 1.5 is often considered less ideal, demonstrating potential liquidity risk. Furthermore, when benchmarking against the industry median current ratio, which was 1.282 in 2023, EQIX's current ratio is still below the median, which intensifies the concerns. The 20-year trend reveals a peak in liquidity back in 2004 with a current ratio of 3.3216 while showing a gradual decline since then. Overall, the decrease in the current ratio for 2023 doesn't let us assign the additional point according to the Piotroski criteria. As this key metric has dropped instead of increased, it signals that there might be liquidity constraints in the short term.

Number of shares not diluted?

The Piotroski analysis rewards companies that are reducing their outstanding shares, as this indicates potential share buybacks or better capital management. A decrease is thus considered favorable.

In 2023, Equinix (EQIX) reported outstanding shares of 93,615,000, compared to 91,569,000 in 2022. This represents an increase, translating to no point being added under Piotroski's criteria for change in shares outstanding. Over the last 20 years, Equinix has consistently increased its share count from 9,604,000 in 2003 to 93,615,000 in 2023, which might reflect capital raising for expansion but could concern some investors about possible dilution.

Operating of Equinix (EQIX)

Cross Margin is growing?

The Piotroski F-Score evaluates a company's financial health by assigning a point if the company's Gross Margin has increased compared to the previous year. For Equinix (EQIX), the Gross Margin rose slightly from 0.4835 in 2022 to 0.4837 in 2023.

Equinix's Gross Margin has demonstrated a modest increase from 0.4835 in 2022 to 0.4837 in 2023. Though this increment is marginal, it still signals an improvement, affirming a 1-point allocation according to the Piotroski criterion. Over the last two decades, Equinix's Gross Margin showcased resilient growth and outperformed the industry median in several years. The observed stability in the company's Gross Margin highlights its robust operational efficiency, despite the industry's fluctuations. For example, the industry median gross margin in 2023 stands at 0.4759, below Equinix's reported figure.

Asset Turnover Ratio is growing?

Asset Turnover is critical for assessing a company's efficiency in generating sales from its assets. An increase implies better utilization.

The Asset Turnover ratio for Equinix (EQIX) has increased from 0.2495 in 2022 to 0.2601 in 2023, garnering 1 point according to Piotroski criterion. Reviewing the past 20 years, there has been variability but overall a trend of efficient asset usage. This recent increase signifies an improvement indicating more effective asset deployment to generate revenue. This positive trend is crucial for investors seeking efficient operational management.