Last update on 2024-06-07

Entergy (ETR) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Discover Entergy (ETR)'s Piotroski F-Score analysis, evaluating its profitability, liquidity, and efficiency. Final score: 6/9 for the year 2023.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score assesses a company's financial strength through profitability, liquidity, and operating efficiency. Entergy (ETR) scored 6 out of 9, indicating decent but not exceptional performance. Notable positive aspects include strong net income, high cash flow from operations, improved return on assets, and increasing gross margin. However, concerns arise from declining current ratio, an increase in outstanding shares, and reducing asset turnover ratio, pointing to liquidity and efficiency issues.

Insights for Value Investors Seeking Stable Income

Based on Entergy’s analysis with a Piotroski score of 6, Entergy shows some strengths and weaknesses. The strong profitability and cash flow are encouraging, suggesting that Entergy can generate and sustain profits. However, the concerning liquidity and operational efficiency indicators advise caution. If you’re an investor seeking strong and consistent financial performance, it might be worth looking into this stock further, especially if they can address liquidity concerns and improve asset utilization.

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

Profitability of Entergy (ETR)

Company has a positive net income?

Check if the net income is positive or negative. If positive, add 1 point; if negative, set it to 0.

The net income for Entergy in 2023 is $2,362,310,000, which is a significant positive figure. Compared to the past 20 years, where Entergy has experienced both positive and negative net incomes, this current figure is notably strong. The largest previous net income was $1,408,653,000 in 2020, making the 2023 figure a remarkable improvement and a good indicator of profitability.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the cash a company generates from its regular operating activities. It's crucial as it shows the company's ability to generate core business profits.

The Cash Flow from Operations (CFO) for Entergy (ETR) is $4,294,328,000 in 2023. This value is notably positive, and therefore, according to the Piotroski criterion, the company earns 1 point for this measure. Historical data indicates this is the highest CFO value in the past 20 years. Previous years show fluctuations but mostly positive trends, with values like $3,929,319,000 in 2004, $3,419,415,000 in 2006, and $2,585,490,000 in 2022, suggesting that Entergy has consistently generated positive CFO, reaffirming the company's robust operational cash generation capability.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) compares profitability over time, indicating whether a company is utilizing its assets to generate earnings more effectively.

The ROA for Entergy (ETR) increased from 0.0186 in 2022 to 0.0399 in 2023. This substantial improvement more than doubled the ROA, reflecting enhanced efficiency in asset utilization. Consequently, one point is added for this improved metric. However, when we examine historical data, the company's ROA is still significantly underperforming the industry median, which has consistently hovered around 0.5 over the past two decades. Despite the positive trend for 2023, ETR has considerable room for improvement to match the industry's median ROA.

Operating Cashflow are higher than Netincome?

This criterion examines whether a company’s cash flow from operations is greater than its net income. A higher operating cash flow compared to net income indicates good earnings quality as it suggests the company is generating enough cash to sustain its operations.

For the year 2023, Entergy (ETR) reported an Operating Cash Flow (OCF) of $4,294,328,000 and a Net Income (NI) of $2,362,310,000. Since the OCF is significantly higher than the NI, we add 1 point for this criterion. Historically, Entergy has shown variability in this metric, but the substantial jump in operating cash flow in 2023 likely signals improved operational efficiency. Positive cash flow is critical for utility companies like Entergy to fund their substantial capital expenditures and pay dividends to shareholders. Therefore, this trend is good and suggests robust financial health.

Liquidity of Entergy (ETR)

Leverage is declining?

Change in Leverage refers to the fluctuation in the company's debt levels relative to its equity, reflecting its financial structure's risk and conservatism.

Entergy's leverage in 2022 was 0.4032, compared to 0.3854 in 2023. This indicates a marginal leverage decrease of 0.0178 points. A declining leverage suggests reduced dependence on debt for financing, ultimately arguing for greater financial stability. Historical data illustrates an upward trend in leverage over recent years, jumping from 0.2626 in 2003 to 0.3854 in 2023. Despite this downward blip, the upward trend is relatively sustained.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with short-term assets. It is a crucial liquidity metric.

For Entergy (ETR), the Current Ratio decreased from 0.6429 in 2022 to 0.5723 in 2023. This decline indicates a decreased ability to cover short-term liabilities with short-term assets, which could be a red flag for liquidity concerns. Given that the industry median for the Current Ratio in 2023 is 0.7878, Entergy appears to be significantly trailing its industry counterparts in terms of liquidity. Over the past 20 years, Entergy's current ratio has been on a downward trend since around 2010, indicating long-term liquidity issues. As the Current Ratio has decreased in 2023, this criterion sets the point to 0.

Number of shares not diluted?

This criterion evaluates whether the number of shares outstanding has decreased year-over-year, which can be an indicator of shareholder value through share buybacks.

In 2022, Entergy had 204,450,354 outstanding shares, which increased to 211,569,931 in 2023. This represents an increase in outstanding shares, which can be considered a negative trend under the Piotroski analysis framework as it typically suggests that the company is not engaging in significant share buybacks to return value to shareholders. Historically, over the last 20 years, the outstanding shares have fluctuated but largely decreased until recent years where there has been a slight upward trend. Thus, for the year 2023, Entergy would not score a point for this criterion, setting it to 0.

Operating of Entergy (ETR)

Cross Margin is growing?

The change in gross margin year-over-year is a crucial indicator in the Piotroski F-Score. It assesses whether a company is becoming more efficient at delivering its products or services, as a rising gross margin indicates enhanced profitability.

For Entergy (ETR), the gross margin increased from 0.3833 in 2022 to 0.4387 in 2023. This improvement signifies that Entergy has become more efficient at managing its cost of goods sold relative to its revenue. Gross margin is also a critical profitability metric. Adding to this, over the past 20 years, we've observed fluctuations in Entergy's gross margin, with previous values such as 0.5818 in 2003 and 0.5140 in 2020. This long-term data shows that a higher gross margin in 2023 linearly follows the rebounding trend after a dip in prior years. Across the same period, the industry median gross margin remained relatively constant around 0.4 to 0.5, except for outliers. Entergy's improvement in 2023 surpassing the industry median (0.4109) also bodes well compared to historical performance.

Asset Turnover Ratio is growing?

Asset Turnover ratio measures a company's efficiency in using its assets to generate sales revenue. It is important to monitor because it reveals the effectiveness of the management's asset utilization strategies.

In 2023, Entergy’s Asset Turnover ratio was 0.2054, down from 0.2332 in 2022. This represents a decrease, meaning Entergy was less efficient in utilizing its assets to generate revenue compared to the previous year. Given the historical data over the last 20 years, the Asset Turnover has generally been on a decline from its peak in 2008 (0.3727). The recent decline suggests a continuing trend, which raises concerns about the company's ability to effectively use its assets. Therefore, for this criterion, the score is 0.