Last update on 2024-06-07

Hershey (HSY) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Piotroski F-Score analysis of Hershey (HSY) for 2023, with a score of 8/9. Evaluates profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 8

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

Hershey (HSY) has been evaluated using the Piotroski F-Score, which measures the company’s financial health across nine criteria. Hershey scored an 8 out of 9, indicating a strong financial position. Hershey exhibited excellent profitability, with consistent positive net income and cash flow, showing an increase in Return on Assets (ROA) and maintaining higher operating cash flow than net income. Their financial liquidity has shown improvements, with an increasing current ratio and a trend of share buybacks over the past 20 years. However, Hershey's leverage has slightly increased, showing a rise in the company's debt levels relative to its assets. Additionally, their gross margin and asset turnover ratios have improved, reflecting better cost management and efficient use of assets.

Insights for Value Investors Seeking Stable Income

Based on this analysis, Hershey (HSY) appears to be a robust investment opportunity with strong profitability indicators and a reasonably healthy balance sheet. Despite a slight increase in leverage, the company’s positive trends in net income, cash flow, asset efficiency, and liquidity make it worthy of consideration for investors looking for a solid, financially stable stock. It is recommended to further monitor Hershey's debt levels and compare its performance with industry peers for a more comprehensive assessment.

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

Profitability of Hershey (HSY)

Company has a positive net income?

Positive net income signifies a company's profitability over a particular period. Consistently positive net income over many years strengthens investor confidence.

Hershey's net income for 2023 is $1,861,787,000, marking a positive trend. This robust figure merits adding 1 point. Over the past 20 years, Hershey has consistently reported positive net income, exhibiting an upward trend from $457,584,000 in 2003 to $1,861,787,000 in 2023. This consistent trend underscores Hershey's efficient management and strong market position, contributing to long-term investor confidence.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) criterion determines if a company's core business operations are generating positive cash flow, indicating efficient operations.

For Hershey (HSY), the CFO in 2023 is positive at $2,323,190,000. Given the trend over the past 20 years where cash flows have consistently grown from $592,943,000 in 2003 to the current value, this is a great sign of financial health and operational efficiency. Despite fluctuations, such a robust trajectory demonstrates that Hershey has been successful in scaling its operations and maintaining profitability. This positive CFO gives Hershey 1 point in the Piotroski score. Indeed, the sustained annual increase in operating cash flow showcases the company's strong management and market position.

Return on Assets (ROA) are growing?

The criterion assesses the change in Return on Assets (ROA) from one year to the next. This metric is crucial for evaluating how efficiently a company's management generates earnings from its assets. An increase in ROA indicates improved asset efficiency and profitability.

For The Hershey Company (HSY), the ROA increased from 0.154 in 2022 to 0.1629 in 2023. This indicates an improvement in asset efficiency and profitability, which is a positive trend. Given the steady increase and comparing to the industry's median ROA, which has been experiencing a decline (from 0.3935 in 2015 to 0.3072 in 2023), Hershey's performance in enhancing ROA stands out. This is indicative of Hershey's robust operational strategies and superior asset management, especially when the median ROA in the industry is decreasing. This criterion adds 1 point to Hershey's Piotroski score, underscoring its financial health and operational efficiency.

Operating Cashflow are higher than Netincome?

This criterion assesses if a company's operating cash flow exceeds its net income. It's important because it indicates strong cash earnings and efficient profitability, suggesting the company can generate ample cash from its operations.

For Hershey (HSY), the operating cash flow in 2023 was $2,323,190,000, while the net income was $1,861,787,000. Since the operating cash flow is indeed higher than the net income, HSY scores 1 point for this criterion. Analyzing the trend over the past 20 years, Hershey has often maintained a positive gap between operating cash flow and net income. For example, in 2022, the operating cash flow was $2,327,837,000, compared to a net income of $1,644,817,000, which further bolsters this positive trend. This consistency underscores the company's strong operational efficiency and profitability. Over the two decades, Hershey's robust cash flow also reflects its ability to reinvest in business growth and shareholder returns, making this trend favorable.

Liquidity of Hershey (HSY)

Leverage is declining?

Change in leverage refers to the change in the company's total debts divided by its total assets. A decreasing leverage ratio suggests reduced debt levels relative to assets and is a positive indicator of financial health.

When analyzing the change in leverage for Hershey (HSY), we observe that the leverage ratio increased from 0.3323 in 2022 to 0.3416 in 2023. This 0.0093 uptick in the leverage ratio indicates that Hershey has slightly increased its level of debt relative to its total assets. Over the last 20 years, the leverage has shown fluctuations, peaking at 0.4678 in 2020 and hitting its lowest at 0.1819 in 2004. The current increase suggests the company might be pursuing new investments or face increased borrowing needs. This adverse trend receives a score of 0 in the Piotroski Analysis as the firm's debt burden has escalated.

Current Ratio is growing?

The criterion for measuring Hershey's Current Ratio involves comparing its current assets to its current liabilities. This ratio is pivotal for assessing a firm's capacity to cover short-term obligations with short-term assets.

In 2023, Hershey (HSY) saw its Current Ratio rise to 0.968 from 0.8045 in 2022. This increase, although modest, is significant and signals improved liquidity, which is crucial for meeting short-term liabilities more comfortably. Over the span of the last 20 years, Hershey's Current Ratio has shown fluctuations ranging from a high of 1.9316 in 2003 to a low of 0.8045 in 2022. In comparison to the industry median, which stands at 1.659 in 2023, Hershey's Current Ratio still lags behind, indicating room for further improvement. Nonetheless, this year's increase earns Hershey 1 point, reflecting a positive trend in its short-term financial health.

Number of shares not diluted?

Changes in outstanding shares indicate a company’s capital decisions. A decrease often implies share buybacks, suggesting management’s confidence in the company.

In 2023, Hershey's outstanding shares decreased to 204,738,000 from 205,535,000 in 2022. This decrease means that Hershey likely repurchased some of its shares, which is generally regarded as a positive signal. Over the last 20 years, Hershey has consistently reduced its outstanding shares from 264,499,422 in 2003 to 204,738,000 in 2023. This consistent reduction, inclusive of a decrease of 797,000 shares from 2022 to 2023, underscores a trend of strong capital strategy and shareholder value enhancement and warrants a score of 1 under this criterion.

Operating of Hershey (HSY)

Cross Margin is growing?

Change in Gross Margin assesses a company's efficiency in producing profit relative to its cost of production. An increasing Gross Margin suggests improved profitability and cost management.

In 2023, Hershey (HSY) reported a Gross Margin of 0.4476 compared to 0.4318 in 2022. This indicates an increase in Gross Margin, which is favorable. The trend showcases efficiency improvements, as the Gross Margin has risen by 1.58 percentage points from 2022 to 2023. Reviewing the past 20 years, Hershey's Gross Margin has consistently remained above the industry median, further underscoring its strong profitability position. Given this increased profitability in 2023, the criterion sets the score to 1.

Asset Turnover Ratio is growing?

Assessing changes in asset turnover evaluates a company's efficiency in utilizing its assets to generate sales.

Hershey's asset turnover increased marginally to 0.9772 in 2023 from 0.9755 in 2022, indicating better asset utilization. Although the rise is slight, it bucks the trend of decreasing ratios observed over the preceding years, making this a promising sign of improving efficiency. In context of historic data peaking at around 1.4498 in 2009, there is room for improvement despite recent enhancements.