Last update on 2024-06-07

Gentex (GNTX) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Gentex (GNTX) analysis for 2023 showcasing an exceptional Piotroski F-Score of 8/9, reflecting strong financial health and efficient operations.

Short Analysis - Piotroski Score: 8

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

The Piotroski F-Score is between 0 to 9 and reflects a company's financial strength. It covers 9 criteria in profitability, liquidity, and leverage. Gentex (GNTX) has a Piotroski score of 8. The analysis covers Gentex's profitability, showing positive net income and cash flow, increasing ROA, and higher operating cash flow than net income. Gentex also demonstrates strong liquidity with a stable leverage ratio of 0, a growing current ratio, and a decrease in outstanding shares. Operationally, Gentex shows growing gross margins and asset turnover ratio. Overall, this suggests a robust financial health for Gentex.

Insights for Value Investors Seeking Stable Income

Given Gentex's high Piotroski score of 8, indicating strong financial health, it is worth considering for investment. The consistent profitability, efficient cash flow management, increasing ROA, positive liquidity indicators, and operational efficiency trends reflect a well-managed company. Therefore, it appears to be a strong and undervalued investment opportunity for cautious investors.

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

Profitability of Gentex (GNTX)

Company has a positive net income?

Determine whether Gentex's net income for 2023 is positive or negative, which directly affects its profitability.

The net income for Gentex (GNTX) in 2023 is $428,403,272, indicating a positive trend. With a net income of this magnitude, the company clearly adds 1 point to its Piotroski score. Historically, Gentex has maintained a positive net income over the past 20 years, illustrating consistent profitability and strong financial health. For instance, in 2018, the net income was slightly higher at $437,883,097, while in 2008, during a period of global financial crisis, it stood at $62,087,947. This consistent profitability signals sound business operations and stable growth, marking this criterion as a positive indicator for investors.

Company has a positive cash flow?

This criteria reviews cash flow from operations (CFO) to determine the firm's ability to generate cash from core business activities. Positive CFO indicates financial health.

Gentex Corporation (GNTX)'s CFO in 2023 is $537,249,592, which is notably positive. Over the past 20 years, Gentex has consistently generated positive operating cash flows, starting from $116,582,995 in 2003 and growing generally upward with minor fluctuations. This consistent generation of operating cash flow illustrates the company’s robust operational efficiency and ability to convert revenue into actual cash. In 2023, the significant increase to over half a billion dollars in CFO is a strong indicator of Gentex’s solid financial health and proficient cash management. Adding 1 point for positive CFO is deserved in this situation. This trend is positive and shows resilience and steady growth, underpinning investor confidence in the company's future cash-generating capabilities.

Return on Assets (ROA) are growing?

Return on Assets (ROA) compares a company's annual earnings to its total assets. An increasing ROA indicates improved efficiency in using assets to generate earnings, which is crucial for evaluating management effectiveness.

The ROA for Gentex increased from 0.143 in 2022 to 0.1735 in 2023. This rise denotes a notable improvement in asset utilization, reflecting better operational efficiency and stronger management performance. Compared to the industry median ROA which stood at 0.1863 in 2022 and 0.196 in 2023, Gentex's figures are slightly below the median. Nevertheless, the upward trend is promising as it closes the gap with the industry benchmarks and signifies a robust internal performance.

Operating Cashflow are higher than Netincome?

Higher Operating Cash Flow compared to Net Income indicates strong earnings quality and efficient cash management.

For Gentex (GNTX) in 2023, the Operating Cash Flow stands at $537.2 million whereas Net Income is $428.4 million. This results in a positive trend where Operating Cash Flow exceeds Net Income by approximately $108.8 million, thereby scoring 1 point according to the Piotroski Analyses criterion. This metric is crucial as it underscores the company's robust cash generation efficiency, showcasing its ability to convert earnings into actual cash flow. Moreover, this favorable differential manifests good cash health and hints at the proficient management of operational activities, thus reducing the risk of non-cash earnings inflations which can be observed through accruals values over the years.

Liquidity of Gentex (GNTX)

Leverage is declining?

Change in leverage is evaluated by comparing the leverage ratio of the previous year with the current year. A decrease in leverage generally indicates improved financial stability.

Gentex's leverage ratio has remained at 0 in 2022 and 2023, suggesting that the company's debt levels have neither increased nor decreased. This implies that Gentex has opted for a debt-free approach similar to previous years, aside from a brief period between 2013 to 2017 where leverage was slightly above 0. During those years, the highest ratio was 0.1506 in 2013, gradually reducing back to 0 by 2017. This long-term data shows they have managed their debt conservatively over the years. Despite the 2023 leverage being unchanged from 2022, the leverage should ideally decrease to earn a point. Therefore, on this criterion, Gentex scores 0 points.

Current Ratio is growing?

Explain the criterion for Gentex (GNTX) and why it is important to consider

The Current Ratio, a liquidity ratio that measures a company's ability to pay short-term obligations, is critical in assessing Gentex's financial health. An increasing Current Ratio signals improved liquidity, which means Gentex can more comfortably meet its short-term liabilities. Liquidity is foundational to ensuring operational continuity and financial stability.

Number of shares not diluted?

Change in the number of shares outstanding is crucial to understand dilution or concentration of ownership.

Comparing the share count from 2022 (230,825,293) to 2023 (229,405,479), we see a decrease of 1,419,814 shares. Notably, this decline equates to roughly a 0.62% reduction. Over the past 20 years, Gentex's outstanding shares have generally been on a downward trend, decreasing from 311,711,518 in 2003 to 229,405,479 in 2023—a cumulative reduction of approximately 26.41%. The decline suggests a positive trend in reducing shareholder dilution. Therefore, a 1 point will be added in the context of Piotroski’s criteria.

Operating of Gentex (GNTX)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold. An increase indicates improved profitability and operational efficiency.

Gentex's Gross Margin increased from 31.78% in 2022 to 33.17% in 2023, earning 1 point under the Piotroski Analysis. This improvement reflects a positive trend in profitability, despite still lagging behind the company's historical high of 41.9% in 2003. Compared to the industry's median Gross Margin of 19.6% in 2023, Gentex's margin remains robust, showcasing better efficiency relative to peers.

Asset Turnover Ratio is growing?

The asset turnover ratio measures a company's ability to generate sales from its assets. It is crucial for assessing operational efficiency.

In 2023, Gentex's asset turnover increased to 0.9311 from 0.8608 in 2022. This 8.16% improvement reflects better utilization of assets to generate revenue. Gentex has achieved the highest asset turnover ratio since 2011, when it reported 0.9398. Therefore, for this criterion, Gentex scores 1 point, indicating improved efficiency.