Last update on 2024-06-07

Exponent (EXPO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze Exponent's (EXPO) financial strength using Piotroski F-Score 2023: 7/9. Dive into profitability, liquidity, and efficiency for informed investments.

Short Analysis - Piotroski Score: 7

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

We looked at Exponent (EXPO) using the Piotroski F-Score, a system that rates companies based on their financial strength. EXPO earned a score of 7 out of 9, showing pretty good financial health. The company did well in profitability and liquidity, such as having a positive net income and operating cash flow. Also, its return on assets and current ratio are growing, which is a plus. However, the Gross Margin dropped significantly. The leverage increased, which means the company has more debt now, and it could be a concern.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Exponent (EXPO) seems like a fairly strong investment. It has consistently shown good financial health over the years and has maintained profitability and positive cash flow. However, the drop in Gross Margin and increase in debt might be red flags for some investors. So, it could be worth keeping an eye on these aspects if you decide to invest.

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

Profitability of Exponent (EXPO)

Company has a positive net income?

The criterion evaluates whether the company generated a positive net income in the most recent period. Positive net income is critical as it indicates profitability and operational success, warranting a point in the Piotroski analysis.

Exponent (EXPO) reported a net income of $100,339,000 in 2023, which is positive. Therefore, under this criterion, Exponent earns 1 point. Considering the historical data, EXPO has consistently maintained a positive net income over the past 20 years. This steadfast financial performance underscores a reliable profit-generating capacity, making the recent positive net income yet another affirmation of the company's robust, steady forte in profitability and operational efficiency. The slight deviation in net income figures around 2018-2023, hovering slightly below $100,000,000, against some of the previous years including remarkable upsurge like in 2022 at $102,330,000 point towards sustained efficiency albeit without extravagant spikes.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash a company generates from its regular business operations. It is an important indicator of a company's financial health and operational efficiency.

In 2023, Exponent (EXPO) reported a CFO of $127,352,000, which is a positive value. According to the Piotroski F-Score criteria, a positive CFO earns the company 1 point. Historical data reveals a steady upward trajectory in CFO over the last 20 years, growing from approximately $16.2 million in 2003 to the current $127.4 million. This consistent increase in operational cash flow indicates robust and improving operational efficiency, which is a very positive signal for investors.

Return on Assets (ROA) are growing?

The Return on Assets (ROA) criterion measures the profitability of a company relative to its total assets. It indicates how efficient a company is at using its assets to generate earnings. An increase in ROA suggests improved efficiency and is a positive sign for investors.

In 2023, Exponent (EXPO) recorded an ROA of 0.1627, compared to an ROA of 0.1611 in 2022. This marks an increase in the ROA, thus earning 1 point for this criterion in the Piotroski Analysis. The trend indicates that Exponent is becoming more efficient in using its assets to generate earnings. Although the company's ROA remains significantly lower than the industry median ROA, which has often ranged around 0.5 to 0.6 over the past 20 years, the increased ROA is a positive indicator of internal improvement. This improvement in operational efficiency is crucial for long-term sustainability, even if the company needs to make further advancements to catch up with industry standards.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income criteria evaluates whether a company is generating more cash flow from its operations than it is reporting as net income, indicating strong earnings quality and cash generation ability.

In 2023, Exponent (EXPO) reported an Operating Cash Flow of $127,352,000 and Net Income of $100,339,000. Since the Operating Cash Flow exceeds Net Income, we score 1 point for this criterion. Over the last 20 years, the company's operating cash flow has consistently trended higher compared to its net income on many occasions, highlighting its robust ability to generate cash from core operations. This positively reflects on EXPO's earnings quality, although the gap between operating cash flow and net income has peaked this year, suggesting an increase in non-cash adjustments. This resilient cash generation is indispensable for future growth investments and maintaining financial flexibility.

Liquidity of Exponent (EXPO)

Leverage is declining?

Change in Leverage: Leverage ratio measures the amount of debt a company uses to finance its assets. A decrease in leverage implies lower financial risk.

In this case, Exponent's (EXPO) leverage has increased from 0.0227 in 2022 to 0.034 in 2023. This represents a rise in leverage, indicating that the company has taken on more debt relative to its equity year over year. This could signal potential increased financial risk, as the firm is now more leveraged than before. Over the last 20 years, the company's leverage had been quite low, going as low as 0 in several years. Notably, there was a significant uptick in 2019 to 0.0322, but this level had reduced by 2022. The recent rise in leverage to 0.034 in 2023 is therefore not in line with the general historical low leverage trend of EXPO, which might be a point of concern for conservative investors.

Current Ratio is growing?

The change in current ratio is an important indicator of a company's ability to pay off short-term liabilities with short-term assets. A rising current ratio can signal improving liquidity.

For Exponent (EXPO), the Current Ratio increased from 2.1956 in 2022 to 2.3441 in 2023. This increase in the Current Ratio indicates that EXPO has improved its liquidity position, implying better short-term financial health. Since the.Company’s Current Ratio has increased over the period, it meets this Piotroski criterion and earns 1 point. This is a good trend, reflecting positively on EXPO's management of its current assets and liabilities. Analyzing historical data, EXPO has consistently maintained a current ratio significantly higher than the industry median, which further emphasizes its robust liquidity position relative to its peers.

Number of shares not diluted?

Change in shares outstanding is vital as it influences earnings per share and ownership dilution.

For Exponent (EXPO), the outstanding shares have decreased from 51,727,000 in 2022 to 51,152,000 in 2023. This is a positive trend according to the Piotroski criterion, earning a score of 1. Over the last 20 years, Exponent has consistently repurchased shares, reducing from 60,304,000 in 2003 to 51,152,000 in 2023, which enhances shareholder value.

Operating of Exponent (EXPO)

Cross Margin is growing?

The criterion compares the Gross Margin of one year with the previous year. An increasing Gross Margin indicates improved efficiency in production or services.

From the Gross Margin data provided, Exponent (EXPO) shows a Gross Margin of 0 in 2023 compared to 0.3888 in 2022. This is a clear decrease in Gross Margin. Even when compared to the industry median Gross Margin of 0.5565 in 2023, EXPO’s performance is notably poorer. The former value of 0.3888 in 2022, while lower than the industry median (0.5794), was still significantly better than this year's 0. A zero Gross Margin can mean declining sales and/or increasing cost of goods sold, indicating potentially severe profitability issues. Therefore, based on this criterion, we would assign 0 points for 2023.

Asset Turnover Ratio is growing?

Asset Turnover is a measure of a company's efficiency in using its assets to generate sales, calculated as sales divided by total assets.

The Asset Turnover ratio for Exponent (EXPO) increased from 0.8081 in 2022 to 0.8704 in 2023, indicating improved efficiency in utilizing its assets to generate revenue. This increase earns EXPO 1 point according to the Piotroski Analysis. Over the past 20 years, Asset Turnover fluctuated with higher values typically observed in the early 2000s, peaking at 1.2725 in 2003 and gradually decreasing to a low of 0.6994 in 2020. The latest improvement suggests a positive trend in 2023, aligning with the company's efforts to optimize asset use amid competitive and economic pressures.