Last update on 2024-06-06

Intercontinental Exchange (ICE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Intercontinental Exchange (ICE) scores 6/9 in the 2023 Piotroski F-Score, showcasing robust financial position and operational efficiency.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score is a tool that helps assess a company's financial health by looking at nine criteria. These criteria involve profitability, liquidity, and operating efficiency. For Intercontinental Exchange (ICE), it achieved an F-Score of 6 out of 9. Here's a closer look at the score: - Profitability: ICE scored positively with a stable net income, a positive operating cash flow, improving returns on assets, and operating cash flow higher than net income. - Liquidity: ICE did not do as well here. The leverage increased and the current ratio, which measures the ability to pay short-term obligations, decreased. Both criteria failed to score. - Operating Efficiency: ICE managed to score half the points. The gross margin grew, which is good, but the number of shares outstanding also increased, which is bad for investors because it dilutes the value of each share.

Insights for Value Investors Seeking Stable Income

Despite scoring 6 out of 9, ICE's profile is a mix of strengths and weaknesses. It shows solid profitability with consistent net income and cash flow. However, rising leverage and decreasing liquidity raise concerns. Growing asset turnover and gross margins are positives, but increased shares may dilute value. Investors may consider ICE but should stay cautious and monitor these red flags. Not a clear-cut winner but worth a deeper look for those interested in its strong profit history. Please research further or seek investment advice.

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

Profitability of Intercontinental Exchange (ICE)

Company has a positive net income?

Net income indicates a company's profitability. Positive net income suggests the company is profitable.

The Intercontinental Exchange (ICE) reported a net income of $2.368 billion in 2023. This is a positive net income, thus, ICE scores 1 point for this criterion. Looking at the net income trend over the last 20 years, ICE has consistently maintained positive net income figures, showing a compound annual growth rate in profits. For instance, from a modest $13.38 million in 2003 to a robust $2.368 billion in 2023, ICE’s net income shows an overall positive trend. This sustained profitability underscores the company’s strong financial health and operational efficiency, reinforcing confidence in its continued growth and stability.

Company has a positive cash flow?

Cash Flow from Operations (CFO) refers to the net cash generated from the core business activities of a company. A positive CFO indicates that a company's core operations are generating sufficient cash, which is a healthy sign of financial stability and operational efficiency.

For Intercontinental Exchange (ICE), the Cash Flow from Operations (CFO) for the financial year 2023 is reported as $3.542 billion. This indicates a positive CFO. Over the last 20 years, ICE's CFO trajectory has been remarkably upward with only minor fluctuations. Starting from a modest $27.093 million in 2003, it has seen significant growth reflecting the company's ability to consistently generate cash from its day-to-day operations. In particular, the increases from $375.112 million in 2008 to $1.514 billion in 2014, and further to above $3.5 billion mark in recent years highlight ICE's robust financial health and effective operational strategies. Hence, for this criterion, ICE scores 1 point.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures a company's ability to generate profit from its assets. An increasing ROA is a positive indicator of profitability. The ROA of ICE in 2023 increased compared to 2022, suggesting improved efficiency in using assets to generate earnings.

In 2023, the Return on Assets (ROA) for Intercontinental Exchange (ICE) was 0.0143, an increase from 0.0075 in 2022. This represents a considerable improvement in the company's profitability, as reflected in their ability to use assets more efficiently to generate earnings. When compared to the industry median ROA, which hovered around higher levels as seen from the historical data, the increase in ICE's ROA, while positive, still suggests there is a significant room for growth. Over the past 20 years, ICE's operating cash flow showed a steady increase, indicating an ongoing strength in core business operations. Given that the ROA improved in 2023, we add 1 point for this criterion, signaling a favorable trend in ICE's efficiency. Despite trailing the industry median, the positive trajectory in ROA reflects positively on the company.

Operating Cashflow are higher than Netincome?

This criterion examines whether the operating cash flow is higher than the net income. Operating cash flow is a better indicator of financial health because it reflects cash actually generated from operations, whereas net income includes many non-cash items.

For the year 2023, Intercontinental Exchange (ICE) has an operating cash flow of $3.542 billion and a net income of $2.368 billion. Given that operating cash flow exceeds net income, this criterion is met, adding a point to the Piotroski score. Historically, ICE has shown a consistent increase in operating cash flow, with figures rising from $27.093 million in 2003 to $3.542 billion in 2023. This trend indicates strong cash generation capabilities, a positive financially healthy signal that likely supports the company's resilience in handling its obligations and investments. Therefore, this scenario is favorable, representing good financial health and efficient operational management.

Liquidity of Intercontinental Exchange (ICE)

Leverage is declining?

Change in Leverage is essential as it indicates the company's use of debt relative to equity. Lower leverage often suggests better financial stability.

The leverage for Intercontinental Exchange (ICE) rose from 0.0945 in 2022 to 0.154 in 2023. This reflects an increase in leverage. Higher leverage can be risky as it signifies a greater reliance on debt financing, which can lead to higher interest obligations and increased financial instability during economic downturns. Over the last 20 years, leverage has remained relatively moderate for ICE, but the spike in 2023 could be a point of concern if the company does not manage this effectively.

Current Ratio is growing?

Current Ratio measures a company's capability to cover its short-term liabilities with short-term assets. A higher ratio suggests stronger liquidity.

In 2023, Intercontinental Exchange (ICE) observed a decline in its Current Ratio to 1.0041 from 1.0521 in 2022. This indicates a deterioration in the company's liquidity position, which impacts its financial flexibility. Notably, ICE’s current ratios from 2003 to 2023 have generally trended lower. The industry's median current ratio decreased marginally from 1.0552 in 2022 to 1.0148 in 2023, suggesting the industry's liquidity constraints have similarly intensified. This brings ICE’s score to 0 for this criterion in the Piotroski analysis.

Number of shares not diluted?

Evaluating changes in shares outstanding is crucial as it impacts earnings per share and investor dilution.

Between 2022 and 2023, Intercontinental Exchange (ICE) experienced an increase in outstanding shares from 559 million to 564 million. Over the last 20 years, we observe that shares outstanding have generally fluctuated, with significant increases in the years 2014 (575 million) and 2016 (599 million). The increase of shares outstanding in 2023 indicates a potential equity issuance or employee compensation schemes. This dilutive effect can spread earnings over a larger number of shares, potentially reducing the value of each share. Thus, for the Piotroski score, we assign 0 points for this criterion.

Operating of Intercontinental Exchange (ICE)

Cross Margin is growing?

The criterion for assessing change in gross margin is vital because gross margin directly affects a company's profitability and indicates its efficiency. A higher margin suggests better management of production costs relative to revenue.

In 2023, Intercontinental Exchange (ICE) reported a gross margin of 0.5714, an improvement from 2022's 0.5399. This increase is notable, especially considering industry median trends for the past 20 years have been variable. Notably, ICE's gross margin of 2023 not only surpasses its 2022 value but also aligns more closely with the industry median of 0.6043, signaling effective cost management. Hence, ICE earns 1 point for this criterion. Historically, ICE's gross margins have fluctuated but the increase in 2023 is a positive turnaround compared to some lower-margin years in the past decade. A continued upward trend in gross margin would bolster confidence in ICE’s strategic operational efficiency.

Asset Turnover Ratio is growing?

Asset Turnover measures the efficiency of a company's use of its assets to generate sales revenue. An increase in Asset Turnover generally indicates better performance.

The Asset Turnover ratio for Intercontinental Exchange (ICE) has increased from 0.0497 in 2022 to 0.0599 in 2023, representing an improvement in its efficiency in using assets to generate revenues. Specifically, ICE's Asset Turnover ratio has shown a positive trend and this change merits a 1-point addition in the Piotroski Score. Looking at ICE's 20-year data history, the average Asset Turnover ratio has witnessed fluctuations but has demonstrated an overall downtrend since 2003 when it was 0.4871. The recent increase in 2023 to 0.0599 is thus a favourable shift and can be viewed positively in the context of recent years.