Last update on 2024-06-06

Huntington Ingalls Industries (HII) - Piotroski F-Score Analysis for Year 2023 (Final Score: 9/9)

Detailed Piotroski F-Score analysis for Huntington Ingalls Industries (HII) in 2023, scoring a perfect 9/9 and indicating a strong financial position.

Short Analysis - Piotroski Score: 9

We're running Huntington Ingalls Industries (HII) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Huntington Ingalls Industries (HII) has achieved a perfect Piotroski F-Score of 9, indicating a very strong financial position across various metrics such as profitability, liquidity, and operating efficiency. The company has shown positive net income and cash flow, growing return on assets, favorable operating cash flow compared to net income, declining leverage, a slight improvement in current ratio, reduction in shares outstanding, increasing gross margin, and better asset turnover. However, the company's ROA and gross margin are still below industry median standards, and its current ratio suggests potential liquidity concerns.

Insights for Value Investors Seeking Stable Income

Given Huntington Ingalls Industries' (HII) perfect Piotroski F-Score, it is worth looking into this stock as an investor. The company exhibits strong profitability and cash generation capabilities, improved asset utilization, and shareholder-friendly actions like share buybacks. While there are areas needing improvement, like liquidity and margins compared to industry standards, the overall financial robustness makes HII a compelling option for investment.

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

Profitability of Huntington Ingalls Industries (HII)

Company has a positive net income?

Net income measures the company's profitability by showing the total profit after all expenses.

In 2023, Huntington Ingalls Industries (HII) reported a net income of $681 million. This is a positive net income, thereby satisfying the Piotroski criterion for profitability. Comparing this to previous years' data, HII has consistently generated positive net income since recovering from a loss in 2011. This suggests effective cost management and revenue generation, contributing to financial stability and demonstrating robust business performance over the past decade.

Company has a positive cash flow?

This criteria checks if the company's operating cash flow is positive. It is crucial as it shows the company's ability to generate cash from its operations.

In 2023, Huntington Ingalls Industries (HII) reported a positive Cash Flow from Operations (CFO) of $970 million. This marks an improvement over the previous year (2022: $766 million) and considerably higher than 2013's $236 million. Positive CFO implies that the company is generating enough cash from its core business operations, which is a good indicator of financial health. Over the past 16 years, HII's CFO has consistently stayed positive since 2010, demonstrating strong and stable cash-generating capabilities. Hence, this criterion scores 1 point.

Return on Assets (ROA) are growing?

ROA represents how efficiently a company is utilizing its assets to generate profit, higher ROA indicates better performance

The Return on Assets (ROA) for Huntington Ingalls Industries improved from 0.0539 in 2022 to 0.0617 in 2023, marking an increase. This trend is positive, reflecting HII's enhanced ability to generate profit from its assets. While this one-point increment aligns positively, it should be noted that the ROA is still significantly lower than the industry median of 0.2484 in 2023.

Operating Cashflow are higher than Netincome?

A higher Operating Cash Flow (OCF) compared to Net Income indicates solid core business performance and better earnings quality.

Huntington Ingalls Industries (HII) exhibits an Operating Cash Flow of $970 million compared to a Net Income of $681 million in 2023. This scenario is favorable, adding 1 point in the Piotroski score. Analyzing historical data, the company has seen fluctuating OCF and Net Income, yet in 2023, the significant OCF again underscores healthy operating efficiency and quality of earnings. Over the last twenty years, OCF shows growth despite diversions; the highest being in 2023. The consistent ability to generate cash favorably impacts the financial robustness of HII.

Liquidity of Huntington Ingalls Industries (HII)

Leverage is declining?

Leverage measures the proportion of debt to equity, indicating how much a company is relying on borrowed funds.

Huntington Ingalls Industries (HII) has seen its leverage ratio increase from 0.2177 in 2023 compared to 0.2535 in 2022, a notable drop. This reduction in leverage is advantageous as it suggests HII is relying less on debt and more on equity to finance its operations, thereby reducing financial risk.

Current Ratio is growing?

Change in Current Ratio is a measure of a company's ability to pay off its short-term liabilities with its short-term assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates a better liquidity position.

The Current Ratio for Huntington Ingalls Industries (HII) has increased slightly from 0.9485 in 2022 to 0.9499 in 2023. While this is a minor improvement, HII's current ratio remains below the industry median of 2.1805 in 2023. Over the past 20 years, HII has had fluctuating current ratios, peaking in 2013 at 1.9224 and hitting a low point in 2010 at 0.5898. This trend mirrors the cyclical nature of the shipbuilding industry. Despite the minor improvement in 2023, HII's liquidity position remains weaker compared to the industry standard, suggesting potential vulnerability in meeting short-term obligations.

Number of shares not diluted?

Change in shares outstanding is crucial as it affects the ownership stakes of investors and can indicate corporate actions like buybacks.

In 2023, Huntington Ingalls Industries (HII) had 39,900,000 outstanding shares, down from 40,100,000 in 2022, representing a decrease of 200,000 shares. This reduction adds 1 point to the Piotroski score, given that a decrease in outstanding shares typically signals positive management actions such as share buybacks, which can enhance shareholder value. Over the last 20 years, the number of outstanding shares has seen a decreasing trend—from 49,000,000 in 2008 to 39,900,000 in 2023—suggesting a continued commitment to returning value to shareholders. Thus, the trend is favorable.

Operating of Huntington Ingalls Industries (HII)

Cross Margin is growing?

Change in Gross Margin is crucial as it indicates the company's efficiency in managing its production costs relative to its revenue.

The Gross Margin for Huntington Ingalls Industries (HII) has increased from 0.1349 in 2022 to 0.1437 in 2023. This denotes a slight improvement by approximately 6.52%. While this upward trend is favorable and warrants adding 1 point for the Piotroski score, it is worth noting that the company's Gross Margin still lags behind the industry median of 0.2484 in 2023. Over the last 20 years, HII's Gross Margin shows significant fluctuations, peaking in 2014 at 0.2141. Despite the recent increase, sustained efforts for improved cost management will be vital for HII to remain competitive.

Asset Turnover Ratio is growing?

This metric assesses how efficiently a company utilizes its assets to generate revenue.

Huntington Ingalls Industries (HII) has seen an increase in Asset Turnover from 0.9939 in 2022 to 1.0379 in 2023, reflecting an improvement in its ability to generate revenue from its assets. Historically, HII has maintained a variable Asset Turnover with a high of 2.4988 in 2009 and a low of around 0.9939 in recent years. This increase in 2023 suggests better asset utilization compared to 2022, earning a point in the Piotroski analysis score.