Last update on 2024-06-07

Gerresheimer (GXI.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Gerresheimer (GXI.DE) achieves a Piotroski F-Score of 7/9 for 2023, reflecting strong financial health through profitability, liquidity, and asset utilization improvements.

Short Analysis - Piotroski Score: 7

We're running Gerresheimer (GXI.DE) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Gerresheimer (GXI.DE) was evaluated using the Piotroski F-Score system, which appraises a company's financial health based on profitability, liquidity, and operating efficiency. The company achieved a respectable score of 7 out of 9. Highlights include positive net income, improved cash flow from operations, growing return on assets (ROA), and an increased asset turnover ratio. These indicators show strong profitability and operational efficiency. Moreover, Gerresheimer exhibited a decline in leverage and an uptick in its current ratio, which signifies an enhanced ability to meet short-term obligations and reduced financial risk. The company's only shortfalls were a slight decline in gross margin and an increase in outstanding shares, causing some dilution of shareholder value.

Insights for Value Investors Seeking Stable Income

Overall, Gerresheimer (GXI.DE) seems like a solid investment opportunity as it meets most criteria for strong financial health and operational efficiency. The company’s consistent profitability, growing cash flow, and improved asset utilization present a promising outlook. However, prospective investors should be cautious about the slightly declining gross margin and the recent increase in outstanding shares, which might affect shareholder value. If these factors are not deal-breakers, researching this stock further could be worthwhile.

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

Profitability of Gerresheimer (GXI.DE)

Company has a positive net income?

Net income represents a company's total earnings after expenses. Positive net income indicates profitability.

Gerresheimer's net income in 2023 stands at €116,126,000, which is a significant improvement over the company's historical performance. For instance, in 2007, the company reported a net loss of €1,228,000, highlighting a considerable turnaround. Over the past decade, Gerresheimer has consistently maintained profitable levels, with net income figures above €80,000,000 each year. The positive trend in net income demonstrates the company's robust financial health and operational efficiency. Consequently, this positive net income in 2023 adds 1 point to the Piotroski score, contributing positively to the overall analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the company’s ability to generate cash using its regular business activities. Positive CFO is a good sign of strong operational performance.

Gerresheimer reported a CFO of €294,337,000 in 2023, which is positive. This marks a notable improvement from the previous years. For instance, in 2019, the CFO was €192,924,000, and it steadily increased, reaching €294,337,000 in 2023. This indicates that Gerresheimer's operations are generating increasing amounts of cash, which is advantageous for liquidity and further investments. In the context of Piotroski's F-Score, this positive trend adds 1 point to the score, signaling robust operational health.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's ability to generate profit from its assets and is a key indicator of financial efficiency. It is important as it shows how well a company is using its assets to produce profits.

In 2023, Gerresheimer's ROA increased to 0.0342 from 0.0308 in 2022. This positive change indicates an improvement in the company's efficiency in generating profits from its assets. Over a twenty-year span, Gerresheimer's operating cash flow has shown substantial growth from €36.82 million in 2005 to €294.34 million in 2023, reflecting the company's robust cash-generating capacity. The historical industry median ROA has roughly ranged between 0.51 and 0.57, positioning Gerresheimer below the industry average. While the industry ROA decreased in 2023, it maintained an arc between 0.55 and 0.57. Given Gerresheimer's upward trend, the increase qualifies for an additional point in the Piotroski F-score, signifying a beneficial development but also elucidating the room for further enhancement to match industry standards.

Operating Cashflow are higher than Netincome?

The criterion of Operating Cash Flow (OCF) being higher than Net Income indicates a company's efficiency in generating cash from its operations. It is important to consider because it shows the company's ability to generate cash to meet its financial obligations without relying on external financing.

In 2023, Gerresheimer (GXI.DE) reported an Operating Cash Flow (OCF) of 294,337,000 EUR, which is significantly higher than its Net Income of 116,126,000 EUR. This trend is positive as it indicates robust cash generation, thereby earning a point. Historically, Gerresheimer has shown resilience in its operational cash flow, with a consistent upward trend from 36,821,000 EUR in 2005 to its current level, despite some volatility during certain years. This consistency reinforces the company's operational strength and financial health.

Liquidity of Gerresheimer (GXI.DE)

Leverage is declining?

Assess whether Gerresheimer's financial leverage has increased over the years and its implications for financial risk and stability.

Analyzing the leverage ratios for Gerresheimer (GXI.DE) revealed that the leverage in 2022 was 0.2043, while in 2023, it increased to 0.192. Although this appears to signify a decline when viewed superficially, an examination of the trend over the past two decades shows a five-yearly fluctuation in leverage levels. For instance, leverage reached a peak of 0.32 in 2020 before making a gradual descent. This fluctuation indicates that the measurement for 2023 continues the volatility trend yet shows a better relative reduction from the peak in 2020. Yet, under Piotroski's rule, leverage has shown a decrease in 2023 and so, it is granted 1 point. Thus, this trend exhibits a consistent effort towards greater financial prudence.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. It's a critical liquidity indicator.

For Gerresheimer (GXI.DE), the Current Ratio has increased from 0.7355 in 2022 to 0.8869 in 2023. This increment reflects a positive trend in the company's liquidity, signifying that it has enhanced its ability to cover short-term obligations with short-term assets. By the Piotroski scoring system, this earns the company 1 point. The rise from 0.7355 to 0.8869 demonstrates an improved liquidity position. However, it's important to note that both values remain below the industry's median Current Ratio, which was 2.3418 in 2023. Despite the internal improvement, Gerresheimer lagged behind the industry norm, suggesting potential liquidity risks when compared to its peers. Year-over-year analysis reveals that the company's past years had seen even higher ratios, particularly in 2007 (1.4189) and 2011 (1.4368). Nonetheless, the 2023 figure is an improvement from the decreasing trend observed between 2016 and 2021. Overall, the increased Current Ratio in 2023, despite its underperformance relative to the industry median, is a positive development and marks a step in the right direction for the company's financial health.

Number of shares not diluted?

Change in shares outstanding indicates the management's approach towards capital structure and shareholder value. A decrease often signifies a share buyback, implying enhancement of shareholder value.

The number of outstanding shares for Gerresheimer (GXI.DE) increased from 31,400,000 in 2022 to 33,336,000 in 2023. Given that the outstanding shares increased, this criterion earns a score of 0. The trend indicates a dilution of shareholders' ownership, as the number of shares has remained flat over the previous 18 years, only rising significantly in 2023. This spike suggests a potential capital raising that could dilute current shareholders' value. Maintaining a consistent number of shares often reflects stability and could be more favorable for investors in the long term.

Operating of Gerresheimer (GXI.DE)

Cross Margin is growing?

This criterion examines whether the company's gross margin, the percentage of revenue that exceeds the cost of goods sold, has increased year-over-year. It's important because it measures the company's manufacturing and operational efficiency, impacting profitability.

Comparing Gerresheimer's gross margin in 2023 (0.3001) to 2022 (0.3009), we observe a slight decrease. The gross margin declined from 30.09% to 30.01%. While this change might seem marginal, it negatively affects the criterion since we're seeking improvement. For context, over the last 20 years, Gerresheimer's average gross margin generally trailed the industry median. In 2023, the industry median gross margin was substantially higher at 55.49%, highlighting that even a minor decrease further exacerbates the gap. Therefore, for the Piotroski analysis, this criterion scores 0 points, underscoring a decline in operational efficiency.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets to generate sales or revenue. It's crucial as it reflects management's effectiveness in using company assets.

For Gerresheimer in 2023, the Asset Turnover increased to 0.5869 from 0.5832 in 2022, marking a slight improvement. This increase, although marginal, suggests a better utilization of assets to generate revenue, which is positive. Historically, the company’s Asset Turnover has seen fluctuations, notably higher in the mid-2000s reaching 0.8037 in 2007, before declining to the 0.5 range in recent years. Given the improving trend from 2021 (0.5453), 2022 (0.5832), and 2023 (0.5869), this consistent rise is favorable for Gerresheimer, thus adding 1 point for this criterion.