Last update on 2024-06-06

Alphabet (GOOG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Detailed Piotroski F-Score analysis of Alphabet (GOOG) for 2023, highlighting its financial robustness with an impressive score of 8/9.

Short Analysis - Piotroski Score: 8

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

The Piotroski F-Score is a system that scores a company between 0 and 9 to show its financial health. It looks at 9 factors related to profitability, liquidity, and efficiency. Alphabet (GOOG) scored 8 out of 9, showing strong financial health. Alphabet's net income and cash flow are both positive and have grown significantly over 20 years. The company is able to make good use of its assets to generate profits. While its leverage (debt) has slightly increased and the current ratio (liquidity) is decreasing, the overall picture is positive because Alphabet is buying back shares and improving its gross margin and asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, Alphabet (GOOG) seems like a very strong investment. It shows strong profitability and operational efficiency. The slight increase in leverage and decrease in the current ratio do not overshadow its strong cash flow, increasing net income, and consistent share buybacks. If you're looking for a company with a solid financial foundation and long-term growth potential, Alphabet could be a good option to consider.

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

Profitability of Alphabet (GOOG)

Company has a positive net income?

Net income figures predominantly focusing whether the company is making profit or loss.

For 2023, Alphabet's net income stood at $73,795,000,000, which is unmistakably positive. Moreover, consistently positive net income metric over the past two decades, suggest Alphabet robust profitability,has solidifies its financial stability. Since 2003, Alphabet’s net income trajectory displayed remarkable growth rendering this metric positive with a score of 1 point for Piotroski F-score assessment.

Company has a positive cash flow?

Cash Flow from Operations indicates the amount of cash a company generates from its regular business operations.

The Cash Flow from Operations (CFO) for Alphabet (GOOG) in 2023 is $101.746 billion, which is positive. This positive cash flow signifies robust operational efficiency and financial health. Over the last 20 years, we can observe a steady and substantial rise in the CFO. For example, in 2003, the CFO was approximately $395 million and has grown to over $101 billion by 2023. This continuous increase indicates that Alphabet has consistently generated substantial cash from its core business activities, reflecting strong business performance and increasing financial strength over time.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures a company's efficiency in generating profit relative to its assets over time, serving as an indicator of improving operational efficiency and profitability.

In 2023, Alphabet's ROA increased to 0.1923 from 0.1655 in 2022, gaining 1 point in Piotroski Analysis. This upward trend indicates enhanced asset utilization for generating profits. However, Alphabet's ROA still significantly lags behind the industry median, which fluctuates around 0.7, suggesting room for improvement compared to peers. Despite this gap, Alphabet's robust $101.75 billion operating cash flow highlights strong operational capabilities. Sustained ROA growth could reflect strategic asset investments translating into higher returns, positioning Alphabet favorably amid market challenges.

Operating Cashflow are higher than Netincome?

Operating Cash Flow is higher than Net Income. This indicates that the company has strong cash generation capabilities beyond just accounting profits, which enhances financial stability.

Alphabet's operating cash flow in 2023 stands at $101.75 billion, significantly higher than its net income of $73.80 billion for the same period. This Delta of approximately $27.95 billion highlights Alphabet's robust cash flow generation capabilities. Over the past 20 years, Alphabet's operating cash flow has consistently grown, starting from $395 million in 2003 to its current heights. Likewise, net income has also experienced growth from $105 million in 2003 to $73.8 billion in 2023. The figures underline the strength of Alphabet’s business model, wherein the company can not only generate substantial accounting profits but also convert a significant portion of these profits into liquid assets. This consistency earns Alphabet an additional 1 point in the Piotroski Analysis framework.

Liquidity of Alphabet (GOOG)

Leverage is declining?

Change in Leverage measures the company's debt levels compared to its equity. It's important for understanding the company's risk and financial health.

Alphabet's leverage ratio increased from 0.0745 in 2022 to 0.0639 in 2023, indicating a trend contrary to long-term sustainability. Given the historical context since 2003, the company's leverage ratio has seen fluctuations, peaking at 0.0785 in 2020 before declining. A leverage increase may signify higher financial risk, lowering Piotroski's analysis score by 1 point this year.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its short-term assets. A stable or increasing current ratio suggests strong liquidity.

In 2023, Alphabet's current ratio was recorded at 2.0966, a decrease from 2.378 in 2022. Thus, the current ratio has decreased, resulting in a Piotroski score of 0 for this criterion. Over the past 20 years, Alphabet's current ratio has shown a downtrend, moving from a high of 12.0758 in 2005 to 2.0966 in 2023. Despite a decreased current ratio in 2023, Alphabet's liquidity remains healthy, especially when compared to the industry median of 2.2043.

Number of shares not diluted?

Change in shares outstanding refers to the difference in the total number of a company's outstanding shares over a period. It's important because it can indicate dilution or buyback.

In the case of Alphabet (GOOG), the outstanding shares have decreased from 13,063,000,000 in 2022 to 12,630,000,000 in 2023. This 3.3% reduction (approximately 433 million shares) is a positive signal, suggesting the company is executing share buybacks. A consistent trend in share buybacks generally indicates management's confidence in the company's future prospects and can lead to increased earnings per share for investors. Hence, Alphabet earns 1 point for this criterion.

Operating of Alphabet (GOOG)

Cross Margin is growing?

Gross margin represents the proportion of revenue that exceeds the cost of goods sold, providing insights into a company's operational efficiency.

In 2023, Alphabet's gross margin increased to 0.5663 from 0.5538 in 2022. This is a positive trend for Alphabet, as an increase in gross margin typically indicates improved operational efficiency and profitability. Consequently, Alphabet would score 1 point for this criterion in the Piotroski Analysis.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's ability to generate sales from its assets.

In 2023, Alphabet (GOOG) registered an Asset Turnover of 0.8009, compared to 0.7807 in 2022. This marks an increase, contributing positively to the Piotroski F-Score. This upward trend is beneficial, signifying improved efficiency in utilizing assets to generate revenue.