Last update on 2024-06-07

Hanesbrands (HBI) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Hanesbrands (HBI) - Piotroski F-Score Analysis for 2023 reveals a score of 4/9, assessing profitability, liquidity, and efficiency for long-term investor insights.

Short Analysis - Piotroski Score: 4

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

The Piotroski F-Score analysis evaluates a company's financial health across 9 criteria including profitability, liquidity, and operational efficiency. Hanesbrands (HBI) achieves a Piotroski F-Score of 4, indicating mediocre financial health. This score is derived from mixed results: Lenitive profitability indicators with positive cash flow and improvements in Return on Assets, yet weak liquidity and leverage on the rise. The current ratio decreased, and shares outstanding increased, leading to points being lost in these areas. Notably, Hanesbrands also witnessed a drop in gross margin and a modest rise in asset turnover, suggesting some operational inefficiencies. Overall, given the average score and fluctuating past performance, a careful approach is recommended for potential investors.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 4, Hanesbrands (HBI) shows mediocre financial health with some positive signs but also notable weaknesses. For investors, this mixed assessment implies cautious consideration. Positive aspects like improved ROA and consistent operating cash flow are encouraging but contrasted by rising leverage and declining liquidity. Thus, it would be prudent to delve deeper into specific areas of concern and compare HBI with other companies in similar industries before making an investment decision. Diversification and a focus on stronger candidates may also be advisable.

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

Profitability of Hanesbrands (HBI)

Company has a positive net income?

Explain the criterion for Hanesbrands (HBI) and why it is important to consider

In the Piotroski Analysis, net income should be positive to add 1 point. If negative, no point is added. This criterion is crucial to ascertain if the company is profitable on an annual basis. Investors favor companies that are consistently profitable because continuous losses can erode shareholder value and compromise long-term sustainability.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) measures the cash generated by a company's regular business operations. It's crucial for assessing the company's ability to generate sufficient cash flow to maintain and grow operations.

Hanesbrands (HBI) has reported a Cash Flow from Operations (CFO) of $561.749 million in 2023. This figure is positive, so it scores 1 point in this criterion of the Piotroski analysis. Looking at the historical data over the past two decades, we can observe several fluctuations in HBI's operational cash flow. For example, in 2021, the CFO rose to $623.409 million, following a dip in 2020 to $448.469 million. Notably, 2022 experienced a negative CFO of -$358.802 million, a significant divergence from the otherwise positive trend. This positive CFO in 2023 marks a robust recovery. With the factored points system, a positive operating cash flow is a good sign, suggesting HBI's core business operations are generating adequate cash flow, reflective of operational stability and growth potential.

Return on Assets (ROA) are growing?

The ROA criterion evaluates the return on assets. A positive increase from the previous year indicates efficient asset utilization and profitability improvement.

For Hanesbrands, the ROA improved from -0.0187 in 2022 to -0.0029 in 2023. Despite still being negative, this is a considerable improvement, signaling a recovery. This positive trend earns Hanesbrands 1 point in the Piotroski score, reflecting better utilization of assets. Additionally, comparing this with the industry median ROA, which hovers around 0.5464 in 2023, Hanesbrands still has room for significant improvement to match industry standards.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is pivotal because it indicates the company’s ability to turn its net income into cash, which is more difficult to manipulate through accounting strategies.

As of 2023, Hanesbrands reported an Operating Cash Flow of $561.749 million and a Net Income of -$17.726 million. This trend is favorable as the company's Operating Cash Flow is significantly higher than its Net Income, earning it 1 point in the Piotroski Analysis. Over the last 20 years, this pattern is not consistently visible but showcases specific years where operating cash flow was robust in comparison to net income. For instance, 2017 showed $655.718 million in cash flow from operations against $61.894 million in net income, enhancing confidence in cash flow reliability.

Liquidity of Hanesbrands (HBI)

Leverage is declining?

Change in leverage assesses the company's financial risk and capital structure stability by examining variations in debt versus equity proportions.

In 2022, Hanesbrands had a leverage of 0.6056, which increased to 0.6364 in 2023. Leverage quantifies a company’s debt levels in comparison to its equity. Over the past 20 years, Hanesbrands' leverage fluctuated, peaking notably in 2007 at 0.6734 and falling to a low of 0 in 2006. This year’s increase in leverage suggests higher financial risk as the proportion of debt increased vis-à-vis equity. Thus, it doesn't meet the criterion favorably, resulting in 0 points for this factor in the Piotroski analysis.

Current Ratio is growing?

The change in current ratio measures a company's ability to pay short-term obligations with its current assets. A ratio above 1 indicates more assets than liabilities.

The analysis of Hanesbrands Inc. (HBI) presents an important insight into the company's liquidity. In 2022, the current ratio was 1.749. By 2023, this ratio slightly decreased to 1.6369. Therefore, the company's current ratio has not increased but decreased, marking a change of -0.1121 points. Consequently, in terms of Piotroski criteria, HBI receives 0 points for this measure. While a ratio greater than 1 still indicates greater current assets than current liabilities, the decrease raises some concerns about potential liquidity and the company's ability to cover short-term obligations. Additionally, when benchmarked against the industry median ratio of 1.64 in 2023, HBI's 1.6369 is almost at par, indicating average industry performance.

Number of shares not diluted?

Change in Shares Outstanding is a critical metric as it indicates whether the company has issued additional shares or repurchased them. An increase often signifies dilution.

In 2023, Hanesbrands Inc. (HBI) has reported 350,592,000 outstanding shares, compared to 349,970,000 in 2022. This slight increase in outstanding shares means the company has issued more shares rather than repurchasing them. As the outstanding shares have increased, this results in 0 points being awarded for this criterion. Over the last 20 years, HBI’s outstanding shares have fluctuated, with significant increases seen in the early 2000s going from 385,224,000 in 2003 to over 400,000,000 in 2012. In contrast, the more recent years have demonstrated a reduction trend, indicative of stock buybacks or other mechanisms for reducing share count. However, the recent uptick in shares for 2023 reflects a divergence from the recent downward trend.

Operating of Hanesbrands (HBI)

Cross Margin is growing?

Gross margin represents the difference between revenue and cost of goods sold as a percentage of revenue

In 2023, Hanesbrands (HBI) reported a gross margin of 33.65%, down from 35.63% in 2022. This indicates a decrease rather than an increase, warranting a score of 0 for this criterion. The gross margin is a critical measure of profitability, showing how efficiently a company produces its goods relative to its revenue. When compared to industry medians, which have averaged higher in the past two decades (with the 2023 median at 54.64%), Hanesbrands' gross margin has underperformed. This trend of declining margins may raise concerns about HBI's cost management, pricing power, or competitive pressures.

Asset Turnover Ratio is growing?

Change in Asset Turnover examines if the company is using its assets more efficiently to generate sales.

For Hanesbrands (HBI), the asset turnover ratio has increased slightly from 0.9184 in 2022 to 0.9283 in 2023. Since this figure has increased, Hanesbrands earns 1 point for this criterion. An increase in asset turnover is generally positive as it indicates that the company is more efficiently utilizing its assets to produce revenue. In the context of historical data, from 2003 to 2023, the asset turnover has shown considerable fluctuation, peaking at 1.3017 in 2007 and dipping as low as 0.5406 in 2006. This variability could be tied to shifts in business operations, sales performance, and broader economic conditions. The recent increase, although modest, signifies a positive trend and operational improvement when viewed in a year-on-year comparison. Overall, this assessment is favorable for Hanesbrands.