Last update on 2024-06-06

Edwards Lifesciences (EW) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

In-depth Piotroski F-Score analysis of Edwards Lifesciences (EW) for 2023, evaluating financial health with a final score of 6 out of 9.

Short Analysis - Piotroski Score: 6

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

Edwards Lifesciences (EW) was evaluated using the Piotroski F-Score system, which assesses a company's financial health through nine different criteria. The company achieved a Piotroski score of 6 out of 9. Here's a quick rundown: 1. **Profitability**: The company has a positive net income and a positive cash flow from operations, but its return on assets (ROA) decreased. Additionally, its operating cash flow is lower than its net income, reflecting a discrepancy that requires further scrutiny. 2. **Liquidity**: The company's leverage (debt levels) has decreased and its current ratio has improved, which are both indicators of improved financial health and reduced financial risk. Also, the number of outstanding shares has decreased, usually a positive sign indicating share buybacks or equity consolidation. 3. **Operating Efficiency**: Although the company's gross margin slightly declined, the asset turnover ratio improved, showing better use of assets to generate sales. Still, the gross margin is higher than the industry average. Overall, these factors show that Edwards Lifesciences is generally financially healthy but has some areas that need closer evaluation.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 6, Edwards Lifesciences appears to be a reasonably strong investment with good financial health, particularly in liquidity and asset management. However, the inconsistent trends in ROA and the difference between operating cash flow and net income warrant more in-depth investigation. If you're considering investing, it may be worth looking into these specific areas further to ensure long-term stability and growth potential. This stock could be a good addition to a diversified portfolio, provided these concerns are adequately understood and addressed.

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

Profitability of Edwards Lifesciences (EW)

Company has a positive net income?

The criterion checks whether the net income for a fiscal year is positive or negative. A positive net income indicates profitability.

The net income of $1,402,400,000 in 2023 is indeed positive. Furthermore, examining the trend over the past 20 years, Edwards Lifesciences has demonstrated consistent profitability with a net income trend that grew significantly from $79,000,000 in 2003 to $1,402,400,000 in 2023. This trend is favorable and signals strong financial health and operational efficiency. Thus, the criterion yields 1 point, denoting financial strength.

Company has a positive cash flow?

Cash Flow from Operations (CFO) represents the amount of cash generated by a company’s regular operating activities. Robust CFO is pivotal as it signifies the company's ability to generate sufficient cash to maintain and grow its operations, service debt, and provide dividends to shareholders.

Edwards Lifesciences (EW) reported a CFO of $895,800,000 for the year 2023. This indicates a positive cash flow, reflecting the company's solid ability to generate cash from its operating activities. When compared to the last 20 years' data, the CFO has experienced substantial growth over the years with a peak in 2021 at over $1.7 billion. Despite the downswing to $895.8 million in 2023 from over $1.2 billion in 2022, the positive CFO is still a healthy indicator of the company's operational strength. Therefore, Edwards Lifesciences earns 1 point for maintaining a positive CFO in 2023.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is vital for measuring a company’s profitability relative to its total assets, offering insights into management efficacy.

For Edwards Lifesciences (EW), the ROA decreased from 0.1812 in 2022 to 0.1589 in 2023. Thus, no point is added. This downward trend could imply either operational challenges or increased asset base without proportionate profit generation.

Operating Cashflow are higher than Netincome?

This criterion examines if a company's operating cash flow exceeds its net income, signifying the quality and sustainability of earnings.

In 2023, Edwards Lifesciences recorded an operating cash flow of $895.8 million compared to a net income of $1.4024 billion. This disparity reflects an operating cash flow that is lower than the net income, indicating an accrual of 0.0957 for the year. Historically, while there have been fluctuations, the gap is significant in the recent year. A crucial inference is that this might suggest potential earnings management where net income components are not fully reflected in the operating cash flow. Over the last 20 years, the company's operating cash flow only intermittently surpassed the net income. Hence, for this criterion, Edwards Lifesciences scores 0 points. Such trends necessitate further analysis to ascertain the quality and sustainability of reported earnings.

Liquidity of Edwards Lifesciences (EW)

Leverage is declining?

Change in Leverage indicates the company's reliance on debt. It's important as increased leverage signifies higher financial risk.

In the context of Edwards Lifesciences (EW), the leverage increased from 0.0803 in 2022 to 0.0716 in 2023, signalling a reduction in the company's reliance on debt. This is relatively good for the company's financial health as lower leverage means lower financial risk and interest obligations. Historically, the company's leverage has fluctuated, peaking at 0.2572 in 2005 and bottoming at 0 during 2010, thus portraying an overall decreasing trend. The score for this criterion is 1 point.

Current Ratio is growing?

The Current Ratio reflects a company’s ability to pay off its short-term liabilities with its short-term assets, indicating its short-term financial health.

For Edwards Lifesciences (EW), the Current Ratio increased from 3.028 in 2022 to 3.376 in 2023. This upward trend is a positive signal, suggesting enhanced liquidity and financial stability. Over the last 20 years, EW’s Current Ratio has shown considerable variation, peaking at 5.2822 in 2014 and dipping to 1.5495 in 2007. In comparison to the industry median of 4.0615 in 2023, EW's Current Ratio is lower, but the increase from the previous year is notable. The Current Ratio increase results in adding 1 point for this criterion, reflecting improved liquidity. The trend is good as it signifies better short-term financial health relative to the previous year.

Number of shares not diluted?

Shares outstanding refers to the total number of shares currently held by all shareholders, including share blocks held by institutional investors and restricted shares.

In 2023, the outstanding shares of Edwards Lifesciences (EW) decreased to 606,700,000 from 619,000,000 in 2022. This trend indicates that the company has been buying back shares or consolidating its equity structure, which can be a positive sign as it may increase the value of remaining shares and signals strong financial health. Reviewing the historical data over the last 20 years, this is a noteworthy continuation of the trend where the outstanding shares have generally been decreasing, particularly from a peak of 766,800,000 in 2006. Given the decrease in shares outstanding, this criterion would earn a point for Edwards Lifesciences.

Operating of Edwards Lifesciences (EW)

Cross Margin is growing?

Gross Margin reflects a company's efficiency at converting revenue into profit. A higher Gross Margin is indicative of better cost management and pricing power, making it an essential metric to analyze.

When comparing the Gross Margin of Edwards Lifesciences (EW) in 2023, which is 0.7702, to that of 2022, which is 0.7993, it's evident that there has been a decrease. This means that the Gross Margin did not improve in 2023. Historically, EW has maintained a higher Gross Margin compared to the industry median, staying well above 0.5823 in 2003 and peaking at 0.7993 in 2022. The decrease to 0.7702 in 2023 might indicate potential issues in cost control or pricing strategy. Despite this decline, the Gross Margin remains significantly higher than the industry's median Gross Margin of 0.6463 in 2023, showcasing that EW is still outperforming its peers, albeit with a slight setback this year. Consequently, the Piotroski score for this criterion would be set to 0.

Asset Turnover Ratio is growing?

Asset turnover ratio measures a company's efficiency in using its assets to generate sales. It’s vital as it helps assess operational efficiency.

In 2023, Edwards Lifesciences (EW) reported an asset turnover ratio of 0.6802, an improvement from 0.6409 in 2022. This increase signifies enhanced operational efficiency, indicating that EW is generating more revenue per dollar of assets compared to the previous year. Historically, the company’s asset turnover has fluctuated. For instance, it peaked at 0.9041 in 2012 but has generally trended lower since then. The positive change from 2022 to 2023 adds 1 point according to the Piotroski criteria and is seen as a favorable indicator.