Last update on 2024-06-06

General Electric (GE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

General Electric (GE) Piotroski F-Score Analysis for 2023 concludes with a score of 6/9, focusing on profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score is used to measure a company's financial strength. General Electric (GE) has a Piotroski F-Score of 6 out of 9. The company has shown improvement in several key areas: positive net income, positive cash flow from operations, and improved return on assets and gross margin. However, it has not done well in some areas like operating cash flow being less than net income, increased leverage, and a slightly decreased current ratio.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 6, General Electric (GE) shows moderate financial strength. It's encouraging to see improvements in net income, cash flow from operations, and asset turnover. However, the increase in leverage and decrease in current ratio are areas of concern. If you are an investor looking for a moderately strong stock with positive potential and can tolerate some financial risks, GE might be worth further investigation. Long-term sustainability and efficiency in cash generation are key aspects to monitor.

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

Profitability of General Electric (GE)

Company has a positive net income?

Net income represents the company's earnings after all expenses have been deducted from revenue. It is crucial as it indicates the profitability of the company.

In 2023, General Electric reported a net income of $9.481 billion, which is a positive figure. This adds a single point to its Piotroski F-Score. Analyzing the trend over the last 20 years, GE's net income has shown considerable volatility. Peaks were observed in the years 2006 and 2007, with net incomes exceeding $20 billion. However, there were significant downturns in 2015, 2017, and 2018, where the company reported negative net incomes as low as -$22.355 billion. The positive net income in 2023 marks a notable recovery from the fluctuating and often negative values in the previous decade, indicating an improvement in profitability. Such consistency in positive net income is essential for long-term business sustainability and investor confidence.

Company has a positive cash flow?

Cash Flow from Operations evaluates a company's liquidity and its ability to generate sufficient positive cash flow to maintain and grow its operations, a key indicator for solvency and performance.

General Electric (GE) reported a positive Cash Flow from Operations (CFO) of $5.179 billion in 2023, which is an encouraging sign. This positive figure grants GE an additional point in the Piotroski Analysis. Historically, GE has seen a fluctuating CFO, peaking at $48.60 billion in 2008 before facing a significant dip in 2016 and even experiencing negative CFO in 2017 (-$244 million). The return to a positive CFO in 2023, following the COVID-19 pandemic disruptions in 2020 ($3.568 billion) and the steady improvements in the subsequent years, suggests a recovery and improved efficiency in managing their operational activities.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) involves comparing the ROA from the previous year with the current year to determine if there's an improvement in profitability. For General Electric (GE), it's crucial because it indicates how efficiently the company is generating profit from its assets. The higher the ROA, the better it signifies GE’s potential to grow its profits relative to its asset base.

For 2023, General Electric (GE) reported a ROA of 0.0539 compared to 0.0017 in 2022. This marks a significant improvement, warranting a point addition for this criterion. The positive trend in ROA indicates enhanced efficiency in utilizing assets to generate earnings. Over the last 20 years, GE's ROA portrayed mixed performance, with industry median figures ranging from 0.3154 to 0.3616. While still below the industry median, the upward trajectory in 2023 is a positive signal.

Operating Cashflow are higher than Netincome?

Compares the extent to which a company’s operating cash flow covers its net income. It ensures the quality of earnings is sustainable.

In 2023, General Electric's operating cash flow was $5.179 billion, compared to a net income of $9.481 billion. This indicates the operating cash flow is less than the net income, resulting in 0 points for this criterion. Historically, GE’s operating cash flow has decreased significantly over the past 20 years, from $30.289 billion in 2003 to $5.179 billion in 2023, reflecting a downward trend. Concurrently, the net income has faced severe fluctuations, hitting a high of $22.208 billion in 2007 and dropping to losses, such as -$22.355 billion in 2018. This inconsistency and the current lagging operating cash flow signal potential concerns in cash generation efficiency and earnings sustainability.

Liquidity of General Electric (GE)

Leverage is declining?

Leverage measures the degree to which a company is financing its operations through debt versus wholly owned funds. It is pivotal as a high leverage ratio indicates substantial debt levels, inherently linked with higher financial risk.

Comparing General Electric's leverage ratios over the recent years—0.1187 in 2022 and 0.133 in 2023—it's evident that there has been an increase in leverage in 2023. This uptick suggests that GE has augmented its reliance on debt financing. The trend over the past 20 years, characterized by leverage ratios such as 0.2626 in 2003 and peaking at 0.4824 in 2009, highlights that GE has predominantly been engaged in efforts to manage its debt levels. Nonetheless, the increase from 0.1187 to 0.133, while still low compared to historical values, points to a 12.1% rise, warranting attention. Accordingly, one should assign 0 points for this Piotroski criterion as the leverage has not decreased, implicating a vigilant approach towards the rising debt levels.

Current Ratio is growing?

Change in Current Ratio is important as it indicates the company's capability to pay short- term obligations with short-term assets. A higher current ratio typically signifies better liquidity.

The Current Ratio for General Electric (GE) slightly decreased from 1.1812 in 2022 to 1.1754 in 2023, receiving no points as a result. A downward trend, even if marginal, may suggest slightly decreased liquidity, making it potentially challenging for GE to cover short-term liabilities with short-term assets. Over the past 20 years, GE's current ratio has declined substantially from its highs in the early 2000s when it consistently hovered above 2. The industry median has shown more stability, maintaining a slightly higher ratio which suggests that while GE's liquidity was higher in earlier years, it has now aligned more closely with or slightly below the industry median.

Number of shares not diluted?

Shares outstanding measure the total number of a company’s shares that are currently owned by all its shareholders. A decrease typically signals share repurchases, which can be favorable to existing shareholders.

The outstanding shares of General Electric (GE) were 1,096,000,000 in 2022 and 1,089,000,000 in 2023, reflecting a decrease. This decrease of 0.64% in outstanding shares signals that the company engaged in share repurchases over the past year. Such actions are often seen positively by investors because share buybacks can increase the value of remaining shares and indicate a company’s confidence in its financial health. Historical data shows a fluctuating trend over the past 20 years, with significant variances including a peak in 2009 and notable reductions in recent years. Given the current decrease in 2023, GE is awarded 1 point for this criterion in the Piotroski analysis.

Operating of General Electric (GE)

Cross Margin is growing?

Gross margin examines a company's profitability by showing the percentage of revenue that exceeds the cost of goods sold. A higher gross margin suggests better profitability and cost efficiency.

General Electric (GE)'s gross margin has increased from 0.238 in 2022 to 0.2584 in 2023. This is a positive trend signaling enhanced profitability and cost management. To complete the picture, looking at the last 20 years of gross margin, GE peaked in the early 2000s but has witnessed significant fluctuations, especially around 2016 when the gross margin crashed to 0.2369. Despite some improvements, GE's margins have generally been below the industry median, which stands at 0.3492 in 2023. Nevertheless, this year's increase is a step in the right direction, earning 1 point in the Piotroski analysis.

Asset Turnover Ratio is growing?

Asset Turnover Ratio is calculated by dividing net sales by average total assets. This ratio measures the efficiency of a company in using its assets to generate sales. A higher ratio indicates better performance.

General Electric (GE) saw its Asset Turnover increase from 0.2997 in 2022 to 0.3862 in 2023. This trend is positive and indicates improved efficiency in the company using its assets to generate sales. Historically, GE's Asset Turnover ratio has shown significant fluctuations, ranging from a low of 0.1937 in 2011 to the recent high of 0.3862 in 2023—the highest in the past two decades. Such an improvement may suggest operational enhancements or better capital utilization strategies in place within the company. Therefore, we add 1 point for this criterion.