Last update on 2024-06-05

Engie (GZF.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Engie (GZF.DE) gets a score of 5/9 in the 2023 Piotroski F-Score Analysis, indicating moderate financial strength with areas needing improvement.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score is a method to evaluate a company's strength by scoring it between 0 and 9 based on nine different criteria related to profitability, liquidity, and operational efficiency. Engie (GZF.DE) scored a 5 out of 9 when evaluated through this method. Here's a quick breakdown: 1. Profitability: - Positive Net Income: €2,208 million for 2023 (1 point). - Positive Cash Flow: €13.117 billion for 2023 (1 point). - ROA increases: ROA improved to 1.03% in 2023 (1 point). - Operating Cash Flow higher than Net Income: Ratio of ~5.97 (1 point). 2. Liquidity: - Leverage increased: From 0.1193 in 2022 to 0.1948 in 2023 (0 points). - Current Ratio decreased: From 1.1087 in 2022 to 0.9946 in 2023 (0 points). - Shares Diluted: Increase in shares outstanding (0 points). 3. Operational Efficiency: - Increased Gross Margin: From 0.2059 in 2022 to 0.3097 in 2023 (1 point). - Decreased Asset Turnover: From 0.4074 in 2022 to 0.3839 in 2023 (0 points). Given these factors, Engie shows intermediate strength but has some areas of concern, particularly in its liquidity and asset utilization.

Insights for Value Investors Seeking Stable Income

Based on Engie's Piotroski F-Score of 5 out of 9, it may not be the best immediate investment but does show potential for the future. Positive indicators include strong profitability figures and a healthy cash flow. However, the increasing leverage and decreasing current ratio indicate financial risk, while the dilution of shares might also concern long-term investors. Potential investors should consider these mixed signals carefully, possibly waiting for improvement in these weaker areas before making a decision.

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

Profitability of Engie (GZF.DE)

Company has a positive net income?

Net income is a critical indicator of a company's profitability, reflecting the company's ability to generate profit after all expenses have been deducted. Positive net income suggests profitable operations while a negative figure indicates losses.

Engie's net income for 2023 stands at €2,208 million, signaling a positive value which is a strong indicator of profitability. This follows a rather turbulent financial history in the past two decades, with significant net losses in 2011, 2015, 2016, and 2020 ( 2011: -€9,289 million, 2015: -€4,617 million, 2016: -€415 million, 2020: -€1,536 million). The positive net income achieved in 2023 is part of a recovery trend that began in 2021. The company's ability to rebound underscores robustness and effective management strategies in place to navigate through economic challenges, warranting an addition of 1 point in the Piotroski Analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is an essential indicator of a company's financial health, representing the amount of cash generated by its regular business operations.

In 2023, Engie's CFO stands at €13.117 billion, which is a positive value. This indicates that the company generated significant cash solely from its core operational activities. When examining Engie's historical data, one can observe fluctuations in the CFO over the past two decades. For instance, the CFO dip during the 2013-2018 period, with figures oscillating between €7.593 billion to €10.383 billion. The significant peak of €13.6277 billion in 2009 followed by a dip and subsequent recovery to €13.117 billion in 2023 demonstrates resilience and adaptability. This positive CFO for Engie is a solid indicator of robust operational efficiency and liquid financial health. Consequently, this criterion merits 1 point for 2023.

Return on Assets (ROA) are growing?

ROA, or Return on Assets, measures a company's efficiency at generating profit from its assets. A rising ROA suggests better managerial performance and effective use of assets to generate earnings. For Engie (GZF.DE), comparing ROA from 2022 to 2023 reveals key insights into its operational efficiency.

Engie's ROA increased significantly from 0.0009 in 2022 to 0.0103 in 2023, reflecting improved profitability and better asset utilization. This positive trend is a substantial improvement, especially considering that a 1.03% return on assets is a notable rise from the previous year's 0.09%, marking more than a tenfold increase. Despite this improvement, Engie's ROA is still far below the industry's median ROA of approximately 34.16% for 2023. This persistent lag illustrates that there is substantial room for enhancement relative to its peers. However, such growth in ROA should be viewed positively in absolute terms. Given the enhancement, 1 point is added in the Piotroski analysis.

Operating Cashflow are higher than Netincome?

Ratio of Operating Cash Flow to Net Income is a crucial financial metric. It highlights the company's ability to convert net income into cash. A higher ratio is generally positive.

For Engie (GZF.DE) in 2023, the Operating Cash Flow stands at €13.17 billion, significantly higher than the Net Income of €2.208 billion. This results in a multiplier ratio of roughly 5.97, indicating robust cash generation capability from operational activities. Given the trend of consistent OCF surpassing Net Income over most of the past 20 years, this is a strongly positive indicator. Therefore, this criteria scores 1 point.

Liquidity of Engie (GZF.DE)

Leverage is declining?

Leverage measures a company's debt levels relative to its equity. It's crucial to assess leverage trends for financial health and risk management as higher leverage can indicate potential overreliance on debt.

Engie's leverage increased from 0.1193 in 2022 to 0.1948 in 2023, marking a negative trend. The rising leverage suggests growing dependence on debt, potentially heightening financial risks if economic conditions worsen. Historical data show fluctuations in leverage, peaking in 2008 and 2012, suggesting periods of increased financial strain. Despite a recent lowering trend since 2017, the current spike could signal caution for stakeholders.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. A higher ratio indicates a stronger liquidity position.

The Current Ratio of Engie has declined from 1.1087 in 2022 to 0.9946 in 2023. This is a concern as if the Current Ratio had increased, 1 point would be added according to Piotroski’s scoring method. This downward trend means Engie’s liquidity has deteriorated and its ability to meet short-term obligations has weakened. Over the past 20 years, Engie’s ratio peaks were at 1.394 in 2003, while notable drops were seen in years like 2023 (0.9946). Compared to the industry median, Engie’s current ratio has mostly been higher except in 2023. Engie will score 0 on this criterion.

Number of shares not diluted?

This criterion focuses on changes in shares outstanding. If shares have decreased YoY, it suggests positive signaling through share buybacks, benefiting shareholders.

For 2022, Engie had 2,419,985,959 outstanding shares compared to 2,422,000,000 in 2023. Clearly, the outstanding shares have increased, indicating no share buybacks or dilution offsetting other policies like dividends. Historical data shows substantial increases from 2003 to present. Since a rise in outstanding shares generally dilutes shareholder value, this gives a result of 0 points.

Operating of Engie (GZF.DE)

Cross Margin is growing?

Change in Gross Margin assesses whether the company is becoming more efficient. A higher Gross Margin suggests better cost management and pricing power.

Upon comparing the Gross Margin of Engie (GZF.DE) for the years 2022 and 2023, it is evident that the Gross Margin improved from 0.2059 in 2022 to 0.3097 in 2023. This represents a notable increase of approximately 50%. This improvement indicates a positive trend for Engie, suggesting better control over cost of goods sold and potentially improved pricing strategies. Given this strengthening performance, which contrasts positively against the industry median gross margin that increased marginally from 0.2683 in 2022 to 0.3416 in 2023, one can interpret this as Engie regaining its competitive edge. Therefore, a point can be allocated for this criterion in the Piotroski Analyses.

Asset Turnover Ratio is growing?

Change in Asset Turnover measures a company's efficiency in using its assets to generate sales. This is an important indicator of operational efficiency.

In 2023, Engie's (GZF.DE) Asset Turnover was 0.3839, which represents a slight decrease from 2022's 0.4074. This indicates a diminishing efficiency in using its assets to generate revenue. Historically, Engie has had higher Asset Turnover ratios, peaking at 0.7781 in 2007. This declining trend from its historical highs highlights potential inefficiencies or changes in its asset utilization strategy. Thus, no point is added for this criterion.