Last update on 2024-06-07

Harmonic (HLIT) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze Harmonic (HLIT) for its Piotroski F-Score in 2023 and uncover the company's financial strengths and weaknesses.

Short Analysis - Piotroski Score: 7

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

Harmonic (HLIT) has a Piotroski F-Score of 7 out of 9, indicating a strong financial position relative to the criteria used in this analysis. The criteria assess different aspects of financial health, including profitability, liquidity, and operating efficiency. In 2023, Harmonic demonstrates positive net income, positive operating cash flow, and an improved return on assets. However, areas of concern include a decreasing asset turnover ratio and an operating cash flow that is lower than net income, along with increased leverage.

Insights for Value Investors Seeking Stable Income

Based on the strong Piotroski score of 7, Harmonic appears to be a generally good investment, exhibiting signs of profitability and financial stability. Nonetheless, potential investors should be cautious of its challenges in consistently converting net income to cash flow and its recent uptick in leverage. Therefore, it may be worth considering further research and due diligence before making an investment decision.

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

Profitability of Harmonic (HLIT)

Company has a positive net income?

Net income represents a company’s total earnings or profit, and it is crucial for evaluating overall financial health and profitability.

As of 2023, Harmonic (HLIT) reports net income of $83,994,000. This is a positive net income, earning the company 1 point according to the Piotroski score criteria. It's essential to note the significant recovery compared to some challenging years in their 20-year span. For instance, in 2009, the company had a massive negative net income of -$24,139,000, while in 2021 it was $13,254,000 positive. This upward trend in net income in recent years suggests improved profitability and financial health. Historical context thus highlights a significant enhancement in Harmonic's performance.

Company has a positive cash flow?

Operating cash flow (CFO) represents the amount of cash generated or consumed by a company's normal business operations. It is an important indicator because it shows whether a company can generate sufficient positive cash flow to maintain and grow its operations.

Harmonic's (HLIT) CFO for 2023 is a positive $7,059,000. This is a noticeable improvement over the previous year, which recorded $5,476,000. The Historical CFO Trend Analysis reveals significant volatility with negative CFOs observed in several years, such as in 2003 (-$5.56M) and 2004 (-$9.02M). From 2005 onwards, there appears to be an upward trend, with notable peaks like 2007 ($35.36M) and 2008 ($60.13M). The recent positive CFOs are promising, however, consistency is key. Given the positive CFO for 2023, Harmonic would thus earn 1 point according to Piotroski criteria. This actual figure suggests that Harmonic is generating sufficient operational cash to potentially fund its business activities and investments, reflecting an improvement in its overall operational efficiency. This is a positive indicator, although the firm needs to maintain this upwards trend to ensure financial stability.

Return on Assets (ROA) are growing?

The Change in ROA criterion assesses the change in the company's Return on Assets (ROA) from one period to another. ROA measures the efficiency with which a company uses its assets to generate profit. An increasing ROA indicates that the company is becoming more efficient in asset utilization, which is typically a positive indicator for investors.

Harmonic's (HLIT) ROA has increased impressively from 0.0402 in 2022 to 0.1136 in 2023. This improvement suggests that the company is using its assets more efficiently to generate profit, a 182.09% increase year-over-year. This progression is encouraging, especially when juxtaposed against the last 20 years, where operating cash flow has notably fluctuated. While HLIT's 2023 ROA is considerably lower than the industry median of 0.3903, the significant improvement over one year highlights potentially positive momentum. This improving trend earns Harmonic 1 point in the Piotroski analysis for change in ROA.

Operating Cashflow are higher than Netincome?

Operating cash flow greater than net income signifies strong earnings quality. It's important because it shows that a company can consistently convert its income into cash.

In 2023, Harmonic's operating cash flow is $7,059,000 and net income is $83,994,000. The operating cash flow is significantly lower than the net income, resulting in a score of 0 for this criteria. This disparity indicates that while the company is profitable and generating substantial net income, it may face issues in converting those earnings into actual cash flow. Over the past 20 years, Harmonic has experienced fluctuating levels of cash flow and net income, suggesting volatile performance and potential challenges in maintaining consistent cash conversion rates. This raises concerns about the sustainability and quality of current year's earnings.

Liquidity of Harmonic (HLIT)

Leverage is declining?

Change in Leverage measures the company's mix of debt and equity financing. A decrease shows less dependence on debt, applying less financial risk.

The leverage for Harmonic (HLIT) increased from 0.0383 in 2022 to 0.0497 in 2023, indicating a negative trend. Over the past 20 years, HLIT’s leverage has seen significant fluctuations, peaking at 0.2801 in 2020. This rise in leverage suggests increased financial risk, demonstrating the company is becoming more dependent on debt financing, particularly concerning when juxtaposed with prior open market performances.

Current Ratio is growing?

Explain the criterion for Harmonic (HLIT) and why it is important to consider

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets. It is essential as it indicates financial health in the short term, with a higher ratio generally being favorable. A rising current ratio suggests improved liquidity, which can be a sign of better near-term financial stability.

Number of shares not diluted?

Change in Shares Outstanding assesses the dilution or concentration of shares, affecting value per share.

In 2022, Harmonic (HLIT) had 105,080,000 shares outstanding, while in 2023, the number of outstanding shares is indicated as 0. This data suggests a significant decrease in outstanding shares over this period. Consequently, this criterion scores 1 point. Historically, the company has seen fluctuations: from 62,288,000 in 2003 to a peak of 116,457,000 in 2012, followed by a decrease in more recent years, aligning with a potential share consolidation or buyback strategy. Such trends may signal management's confidence in the intrinsic value of the shares.

Operating of Harmonic (HLIT)

Cross Margin is growing?

Gross Margin is a company's total sales revenue minus its cost of goods sold, divided by total sales revenue, represented as a percentage. It's a vital metric in understanding a company’s operational efficiency and profitability, with a higher gross margin indicating better performance.

With a 2023 gross margin of 0.5141 and a 2022 gross margin of 0.5054, Harmonic has experienced a slight increase from the previous year. This rise translates to an improvement in operational efficiency, enhancing profitability by generating more income from each dollar of sales. Looking at the trend from 2003 to 2023, Harmonic's gross margin has generally outperformed the industry median, particularly since 2009, when it consistently achieved higher values. In comparison, the industry median gross margin in 2023 is 0.3903, underscoring Harmonic's stronger pricing power and cost management. Given these figures, an improvement in gross margin in 2023 is a positive indicator, warranting 1 point in the Piotroski score.

Asset Turnover Ratio is growing?

The Change in Asset Turnover criterion evaluates how efficiently a company is using its assets to generate revenue. It helps investors determine if the management is improving the revenue generated from its assets over time, and a higher asset turnover ratio is generally favorable.

Based on the data, Harmonic's (HLIT) Asset Turnover decreased from 0.8904 in 2022 to 0.8225 in 2023. This represents a decline in how effectively the company is generating revenue from its assets. For comparison, the asset turnover ratio has fluctuated over the past 20 years, peaking at 1.0984 in 2005 and reaching its lowest at 0.5703 in 2009. The decrease in 2023 thus indicates a step backward in asset efficiency. Therefore, on the Piotroski score, Harmonic receives 0 points for this criterion.