Last update on 2024-06-07

Heidrick & Struggles (HSII) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Heidrick & Struggles (HSII) 2023 Piotroski F-Score analysis: scored 3/9, revealing diverse financial health indicators. Learn more for investment insights.

Short Analysis - Piotroski Score: 3

We're running Heidrick & Struggles (HSII) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score for Heidrick & Struggles (HSII) is calculated based on 9 criteria addressing profitability, liquidity, and efficiency. HSII earned a Piotroski Score of 3, indicating areas of concern in its financial health. Profitability shows mixed results; net income is positive but cash flow from operations is negative, and ROA is decreasing. For liquidity, the current ratio improved but leverage increased, showing higher risk. In operating efficiency, gross margin improved but recent trends show a decline in asset turnover. Overall, HSII demonstrates some financial strengths but also significant weaknesses.

Insights for Value Investors Seeking Stable Income

Based on a Piotroski Score of 3, it is advisable to approach Heidrick & Struggles (HSII) with caution. While there are some positive signs such as a positive net income and improved current ratio, the negative cash flow, increasing leverage, and declining asset turnover highlight potential financial vulnerabilities. Investors should carefully analyze these risks before considering an investment in HSII, and it may be worth exploring other opportunities with stronger financial health.

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

Profitability of Heidrick & Struggles (HSII)

Company has a positive net income?

Net income serves as a crucial indicator of a company's financial performance and profitability over a given period.

For Heidrick & Struggles (HSII), the net income of $54.41 million for 2023 is positive. This is beneficial as it shows profitability, and thus it earns 1 point for this criterion. Analyzing the historical data, there have been fluctuations in net income over the past 20 years. For instance, 2019's income was $46.87 million, dipped significantly to -$37.71 million in 2020, soaring to $79.49 million in 2022. The current year's positive net income solidifies its financial health and stability despite the observed volatility in previous years, a reassuring trend for investors.

Company has a positive cash flow?

Cash Flow from Operations (CFO) gauges a company's ability to generate sufficient cash to maintain or expand operations. It is a crucial measure for assessing financial health and operational efficiency.

The CFO for Heidrick & Struggles (HSII) in 2023 stands at -$26,792,000, indicating a negative cash flow. Over the past 20 years, the company experienced uneven trends in CFO, including occasional large dips and spikes. For instance, CFO reached a peak in 2021 with $271,401,000, but experienced a significant drop by 2023. This downward trend in the latest year is concerning, reflecting challenges in generating sufficient cash from core operations, which results in 0 points for this criterion.

Return on Assets (ROA) are growing?

Change in ROA criterion for Heidrick & Struggles (HSII) assesses the year-over-year change in Return on Assets (ROA). It is crucial because an increasing ROA indicates improving profitability and efficient use of assets to generate earnings, which can signify financial health and operational efficiency for the company.

The ROA for Heidrick & Struggles (HSII) decreased from 0.0697 in 2022 to 0.047 in 2023, indicating a decline. Therefore, no point is added for this criterion. This downward trend suggests that the company's efficiency in generating profit from its assets has lessened. Comparing to the industry median of ROA, which was 0.3223 in 2023, HSII's ROA not only underperforms but also diverges from the improving trends seen in other firms within the industry. This discrepancy could be problematic for investors, suggesting that HSII needs to scrutinize its asset utilization and profitability strategies more closely.

Operating Cashflow are higher than Netincome?

The Piotroski analysis recommends adding 1 point if a company's operating cash flow exceeds its net income. This suggests strong quality of earnings, as it shows actual cash generation surpassing accounting profits, which bolsters financial stability.

The operating cash flow for Heidrick & Struggles (HSII) in 2023 stands at -$26.79 million, which is significantly lower than its net income of $54.41 million. This disparity results in 0 points being added to the Piotroski score for this criterion, implying a weaker quality of earnings. This negative cash flow from operations, contrasted with a positive net income, suggests that the company's profits may not be as robust as they appear. A closer look at the historical data reveals that this is not an isolated incident; Heidrick & Struggles experienced negative operating cash flow in several years, including 2009 and 2023. This trend could indicate potential issues in cash management or temporary disruptions that may warrant further investigation.

Liquidity of Heidrick & Struggles (HSII)

Leverage is declining?

An analysis of leverage measures a company's debt load compared to its equity. It is crucial to gauge financial stability and the ability to meet long-term obligations.

The leverage ratio for Heidrick & Struggles (HSII) has increased from 0.0538 in 2022 to 0.0685 in 2023. This increase indicates a higher amount of debt relative to equity, which may signal a worsened financial risk profile. Over the past 20 years, the leverage has shown volatility, with notable spikes in 2019 (0.094) and 2020 (0.1102) but a general trend towards higher leverage over time. The rise in leverage for 2023 suggests added financial risk, resulting in 0 points for this criterion.

Current Ratio is growing?

Current ratio measures a company's ability to pay short-term obligations with its short-term assets. It is calculated by dividing current assets by current liabilities. A higher current ratio indicates a stronger liquidity position.

In 2023, Heidrick & Struggles (HSII) has a current ratio of 1.5802, which is an improvement from 1.3999 in 2022. This increase signifies that the company has enhanced its capacity to meet short-term obligations, reflecting a stronger liquidity position. Consequently, adding 1 point to the score for this criterion is appropriate. With respect to long-term trends, HSII's current ratio over the last 20 years shows variability but generally remains in the range of 1.3 to 2.3. Compared to the industry median, HSII's current ratio slightly lags behind in some years but has shown a more pronounced improvement in 2023. The increase suggests better financial health and more prudent management of assets and liabilities, which is a positive signal for investors.

Number of shares not diluted?

Explains how the change in shares outstanding affects the company's financial health. Important in Piotroski Analysis: lower shares might mean higher stock value due to buybacks.

The outstanding shares increased from 19,758,000 in 2022 to 20,029,000 in 2023, indicating a dilution of shares rather than a buyback. This is generally not positive as it might signal that the company is raising funds potentially for covering costs rather than generating profit. Therefore, 0 points.

Operating of Heidrick & Struggles (HSII)

Cross Margin is growing?

The change in Gross Margin criteria analyzes whether a company's efficiency in generating profit from sales has improved from one period to another. This is important as it reflects management’s ability to control production costs and operational efficiency.

Heidrick & Struggles (HSII) experienced an increase in Gross Margin from 0.2542 in 2022 to 0.2652 in 2023. This represents an improvement and earns HSII one point. However, while the recent trend shows improvement, it's crucial to recognize that HSII's gross margin had significantly declined compared to its historical highs, such as 0.9607 in 2010 and 0.9551 in 2008. Additionally, comparing HSII's Gross Margin with the Industry Median for 2023, which stands at 0.3223, reveals that HSII still lags behind the median performance of its peers despite recent improvements. Nevertheless, this upswing is a positive development for HSII's operational efficiency, albeit they have substantial room for further enhancement.

Asset Turnover Ratio is growing?

Asset Turnover is a financial ratio that measures the efficiency of a company's use of its assets to generate sales revenue. It is calculated by dividing net sales by average total assets.

In 2023, the Asset Turnover for Heidrick & Struggles was 0.8986, compared to 0.9495 in 2022. This represents a decrease in the Asset Turnover ratio, implying that the company was less efficient in generating revenues from its assets in 2023 than it was in 2022. Analyzing the provided historic data, the ratio fluctuated over the years but has shown a general downward trend in recent years. Therefore, for 2023, the Asset Turnover did not increase and it receives 0 points. This decline could be indicative of various factors, including decreased sales efficiency or increased asset base without commensurate sales growth.