Last update on 2024-06-07

ESCO Technologies (ESE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Detailed analysis of ESCO Technologies (ESE) showcasing a strong Piotroski F-Score of 8/9 in 2023, reflecting profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 8

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

The Piotroski F-Score is a way to measure how strong a company's financial situation is on a scale from 0 to 9. ESCO Technologies (ESE) scored an 8, which is really good and shows it's financially strong. We looked at several things like profitability, liquidity, and how well the company uses its resources. ESE is making a lot of profit and cash, it's careful with its debt, and it has gotten better at using its assets. However, its cash flow is a bit less than its net income and its ability to cover short-term debts still has space to improve.

Insights for Value Investors Seeking Stable Income

Overall, ESCO Technologies (ESE) seems like a solid investment based on its high Piotroski F-Score of 8. The company appears to be profitable and getting better at managing its resources and debts. If you're looking for a potentially strong company to invest in, ESE might be worth considering. Just keep an eye out on their cash flow compared to income and their ability to handle short-term debts for any long-term investments.

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

Profitability of ESCO Technologies (ESE)

Company has a positive net income?

Reviewing whether a company's net income is positive or negative is crucial because it indicates profitability. Positive net income demonstrates the company's ability to generate profits, which is essential for long-term growth and sustainability.

For the year 2023, ESCO Technologies reported a net income of $92,545,000, which is positive. This marks a considerable improvement from 2003 when the company reported a net loss of $41,138,000. Moreover, over the last 20 years, the company has experienced fluctuations but has maintained a generally positive trend in net income, especially notable post-2011.

Company has a positive cash flow?

Analyzing Cash Flow from Operations (CFO) reveals the actual cash generated by the company's core business operations, reflecting its profitability and financial health.

The Cash Flow from Operations (CFO) for ESCO Technologies (ESE) stands at $76,890,000 in 2023, which is positive. This indicates a point should be added as the company is generating significant cash from its core business operations. Over the last 20 years, ESCO Technologies has shown a consistent ability to generate positive operating cash flow, with a peak of $135,275,000 in 2022 and a low of $38,016,000 in 2003. Despite fluctuations, the trend remains upward, signifying robust operational profitability. This is a strong indicator of financial stability and operational efficiency for ESCO Technologies.

Return on Assets (ROA) are growing?

Change in ROA assesses whether a firm's return on assets has increased, which indicates improved profitability. It's important to measure operating efficiency.

The Return on Assets (ROA) for ESCO Technologies (ESE) increased from 0.0509 in 2022 to 0.0555 in 2023. This rise indicates better management efficiency in employing assets to generate earnings, leading to an increase of +1 point under the Piotroski F-Score criterion. Over the last 20 years, the company experienced fluctuations with significant improvements such as in years like 2019 (0.4828) and 2021 (0.509). Comparing with the industry median ROA, ESCO Technologies' ROA improvement is promising but still lags behind the industry median of 0.4813 in 2023, indicating room for further enhancement.

Operating Cashflow are higher than Netincome?

Cash flow from operations being higher than net income shows a company's earnings quality. It is important because it indicates that the company's profits are supported by actual cash flows, reducing the chances of earnings manipulation.

In 2023, ESCO Technologies (ESE) shows an operating cash flow of $76,890,000 compared to a net income of $92,545,000. The operating cash flow is lower than the net income, resulting in 0 points for this criterion. Historical data over the last 20 years shows varying patterns where in some years like 2018 and 2019, cash flows were significantly higher than net income, indicating strong cash flow generation during those periods. For instance, in 2018, the operating cash flow was $93,259,000, notably higher than the net income of $92,136,000, highlighting a positive trend for that year. However, the current trend for 2023 reflects a less favorable outcome for this specific criterion.

Liquidity of ESCO Technologies (ESE)

Leverage is declining?

Change in Leverage indicates whether a company is reducing its debt levels relative to its equity. Lower leverage signifies reduced financial risk.

In 2022, ESCO Technologies reported a leverage ratio of 0.0954, while in 2023, the leverage ratio decreased to 0.0704. This decline in leverage reveals an improvement in the company's debt management. Comparing it to historical data, the leverage levels were typically higher in the past, peaking at 0.2023 in 2017. A lower leverage ratio in 2023 is a positive trend because it signifies reduced financial risk and better debt management, although it increased compared to the previous year. Therefore, for leverage change, it scores 0 points in the Piotroski analysis.

Current Ratio is growing?

Change in Current Ratio is a measure of a company's liquidity and ability to cover its short-term obligations with its short-term assets. It is important for assessing financial stability.

For 2023, ESCO Technologies' Current Ratio is 1.8468 compared to 1.8 in 2022, indicating an increase. An increase in the current ratio signifies improved liquidity and ability to meet short-term obligations. In the context of Piotroski scoring, this results in a score of 1 point. While the improvement is positive, it's essential to note that ESCO's Current Ratio still trails behind the industry's median of 2.6482 in 2023. Historically, ESCO's ratio shows significant variability, reaching a peak of 4.2219 in 2005 and a low of 1.585 in 2010. The current trend, though up, leaves room for further stability improvements.

Number of shares not diluted?

Change in Shares Outstanding reflects if a company has been proactive in returning value to its shareholders which can be through buybacks, reducing dilution, or other similar activities.

Based on the numbers provided, the Outstanding Shares have decreased from 25,852,751 in 2022 to 25,786,285 in 2023. Therefore, adding 1 point is applicable as the shares have decreased, indicative of a positive trend. Over the last 20 years, we can observe a general reduction in the number of outstanding shares for ESCO Technologies. For instance, in 2003, there were 26,256,000 outstanding shares, which have gradually reduced to the current figure. This suggests that the company has been strategically reducing its share count, likely through share buybacks, which is generally viewed positively by investors as it can signal management’s confidence in the company’s future and directly improves EPS (Earnings Per Share).

Operating of ESCO Technologies (ESE)

Cross Margin is growing?

However, the Gross Margin's change is an essential indicator.

Comparing figures worth noting, ESCO Technologies demonstrated a modest yet noticeable increase of the Gross Margin in 2023. Specifically, it increased from 0.3872 in 2022 to 0.3929 in 2023, a differential of +0.0057. Despite this improvement, ESCO Technologies' Gross Margin continues to lag behind the current industry median of 0.4813. Its historical performance has similarly underperformed relative to the sector's average figures.

Asset Turnover Ratio is growing?

Capital efficiency indicated by asset turnover, which measures how effectively a company uses its assets to generate sales, is critical for growth and scalability.

In 2023, ESCO Technologies (ESE) reported an Asset Turnover of 0.5729, up from 0.5307 in 2022. This increase is indicative of improved efficiency in asset utilization, a positive trend for the company. Historical data over the last 20 years show fluctuations, peaking at 1.0608 in 2004 and hitting a low of 0.461 in 2013. Despite some variability, the recent uptick suggests a focus on optimizing asset deployment. Thus, ESE earns 1 point for this criterion.