Last update on 2024-06-05

Evergy (EVRG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Comprehensive Piotroski F-Score analysis of Evergy (EVRG) for 2023 with detailed financial metrics and trends evaluating profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 5

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

Evergy (EVRG) was assessed using the Piotroski F-Score, a measure of a company's financial position based on nine criteria related to profitability, liquidity, and operating efficiency. Evergy achieved a score of 5 out of 9. In terms of profitability, Evergy scored positively due to its consistent positive net income and cash flow from operations. However, its Return on Assets (ROA) showed a slight decline. It also met the criterion of having operating cash flow higher than net income. In terms of liquidity, Evergy did not perform as well. Its leverage has increased, and its current ratio has decreased, indicating potential issues in managing short-term obligations. However, a positive factor was a reduction in the number of shares outstanding, likely due to share buybacks. Lastly, in operating efficiency, Evergy’s gross margin improved, but its asset turnover ratio declined, suggesting a need for better asset utilization.

Insights for Value Investors Seeking Stable Income

Evergy's medium Piotroski score of 5 suggests it has a mixed financial health profile. The company's consistent positive net income and cash flow from operations are strong points, but the declining efficiency indicators (Return on Assets and Asset Turnover) and issues with liquidity management might raise concerns. For investors, Evergy could be worth considering if you are looking for a company with solid profitability and operational cash flow. However, the decline in some financial metrics and increased leverage suggest a need for caution, and further investigation into these areas is advised before making an investment decision.

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

Profitability of Evergy (EVRG)

Company has a positive net income?

Checking whether Evergy's net income is positive or negative is crucial for assessing profitability.

The net income of $731,300,000 for Evergy in 2023 is positive. This corresponds to 1 point in the Piotroski score. Evergy's net income has shown a generally upward trend over the past 20 years, with minor fluctuations. The lowest net income during this period was $85,010,000 in 2003. Significant leaps are visible in years like 2019 ($669,900,000) and 2015 ($535,800,000), reflecting robust financial health overall. The positive net income recently continues a commendable pattern of sustained profitability, a key factor for any investor considering the company.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a crucial metric as it indicates the amount of cash generated by a company's regular operating activities.

Evergy’s CFO for 2023 stands at $1,980,200,000, showing a positive cash flow. Historically, Evergy's CFO has demonstrated consistent growth, rising from $176,104,000 in 2003 to the current value. This consistent upward trend in CFO indicates robust financial health, reflecting Evergy’s efficiency in generating cash through its core operations. Such a positive and growing CFO appeals to investors as it reassures them of the firm’s ability to sustain and fund its operations, dividends, and potential expansion plans without needing external financing. Hence, for this criterion, Evergy scores 1 point.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's ability to generate profit from its assets. It's crucial for assessing management efficiency in utilizing the company's assets for generating earnings.

The ROA for Evergy (EVRG) decreased marginally from 0.026 in 2022 to 0.0242 in 2023, resulting in a score of 0 for this criterion. This slight decline indicates a reduction in the efficiency with which the company is utilizing its assets to generate profit. Such a reduction could raise concerns among investors regarding the company's operational efficiency, particularly when considering the industry median ROA which stands significantly higher at 0.4109 in 2023. Although this is only a minor decrease, it serves as a signal for potential operational issues that may need to be addressed to stay competitive within the industry's standard performance benchmarks.

Operating Cashflow are higher than Netincome?

One of the Piotroski criteria is that Operating Cash Flow (OCF) should be higher than Net Income (NI). This indicates that a company is generating sufficient cash from operations to support its earnings, which is a sign of good financial health.

For Evergy (EVRG) in 2023, the Operating Cash Flow is $1,980,200,000 while the Net Income stands at $731,300,000. Since the Operating Cash Flow is significantly higher than the Net Income, this criterion is met and scores 1 point. Analyzing the historical data, Evergy has consistently shown an operating cash flow that fluctuates, but generally trends upward over the past 20 years, peaking at its highest in 2023. Conversely, Net Income has demonstrated growth but at a lesser rate. This consistent ability to generate substantial operating cash flow is a signal of robust operational efficiency. Therefore, this trend is favorable.

Liquidity of Evergy (EVRG)

Leverage is declining?

Change in leverage measures if the company's financial risk is increasing or decreasing and is vital for understanding debt management.

In 2022, Evergy reported a leverage ratio of 0.3359, which increased to 0.3568 in 2023, marking a rise. This higher leverage indicates that Evergy has increased its debt load relative to equity, thus one point is not added. Historical leverage data over the last 20 years, showing values like 0.290 in 2005 and 0.2612 in 2018, reflects oscillating trends. Specifically, the significant 2023 increase could suggest aggressive growth strategies financed through debt or challenges in managing existing debt. This upward shift in leverage potentially indicates heightened financial risk.

Current Ratio is growing?

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

By comparing the Current Ratios of Evergy (EVRG) from 2022 and 2023, we observe a decrease from 0.5272 to 0.5093. This deterioration implies a weakening in Evergy's short-term liquidity position, signalling potential challenges in meeting short-term obligations. In the broader context, Evergy's ratio lags significantly behind the industry median, which has hovered around 0.78 in recent years. This disparity suggests that Evergy's liquidity management is trailing its peers, potentially signalling underlying financial stress or operational inefficiencies. Therefore, for this Piotroski criterion, Evergy scores 0 points due to the reduction in its Current Ratio.

Number of shares not diluted?

Change in Shares Outstanding refers to the difference in the number of shares that are currently held by shareholders compared to the previous year.

In this case, Evergy saw its outstanding shares drop from 229,900,000 in 2022 to 0 in 2023, which represents a significant decrease. Historically, a reduction in outstanding shares may imply a share buyback or cancellation, which can be interpreted as a positive move to enhance shareholder value. Therefore, this criterion would earn 1 point based on the Piotroski analysis for share buybacks. However, it's critical to note that the value of 0 in 2023 might reflect an abnormality or data inconsistency, and should typically be reviewed further for accurate context.

Operating of Evergy (EVRG)

Cross Margin is growing?

Gross Margin evaluates a company's core profitability. A higher Gross Margin ratio indicates the business is more efficient at converting sales into actual profit.

For Evergy (EVRG), the Gross Margin increased from 0.4488 in 2022 to 0.5021 in 2023. This signifies an improvement in cost control and revenue generation. The trending data of the last 20 years show gross margins usually ranging between 0.2656 and 0.5751, indicating significant preferable fluctuation. This 2023 value leans towards the higher end of the historical spectrum and is above the industry median of 0.4109, reflecting that Evergy outperformed in maintaining cost-efficient operations. Consequently, a point is added for an AGM improvement.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets in generating sales revenue. The higher the asset turnover, the more efficient a company is. It is an important indicator for potential investors to determine operational performance.

Evergy's Asset Turnover ratio decreased from 0.202 in 2022 to 0.1822 in 2023, indicating a decline. Over a span of 20 years, a downward trend is observed from a high of 0.3076 in 2005. Thus, for the year 2023 this criterion scores 0, suggesting decreased efficiency in asset utilization.