Last update on 2024-06-07

InterDigital (IDCC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

InterDigital (IDCC) earns a 7/9 Piotroski F-Score for 2023, assessing profitability, liquidity, and operational efficiency, indicating strong financial health.

Short Analysis - Piotroski Score: 7

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

Piotroski F-Score is a measure of a company's financial health, scored from 0 to 9 across nine criteria. InterDigital (IDCC) has a solid score of 7. The company demonstrates positive trends in profitability with a net income of $214M in 2023 and consistent positive cash flow over 20 years. Return on Assets has improved, and gross margin has increased, indicating efficiency. However, concerns include rising leverage and a declining current ratio, reflecting increased financial risk. The share count has decreased, indicating strategic buybacks. The asset turnover ratio has improved, suggesting better asset utilization.

Insights for Value Investors Seeking Stable Income

With a Piotroski score of 7, InterDigital (IDCC) looks like a strong investment option due to its profitability, efficiency, and share buybacks. However, investors should be cautious about the increasing leverage and declining current ratio, as these factors introduce some financial risk. Overall, it's worth considering if you can manage potential short-term liquidity concerns.

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

Profitability of InterDigital (IDCC)

Company has a positive net income?

A company with a positive net income is considered more likely to be financially healthy and to be generating profit

InterDigital (IDCC) has a net income of $214,069,000 in 2023. According to the Piotroski Analysis, a positive net income is a favorable sign and adds 1 point to the score. Historically, InterDigital has seen fluctuations in its net income, with significant highs such as in 2006 ($225,222,000) and some declines. The positive net income in 2023 aligns with a rising trend since 2021, improving investor confidence. Hence, this trend is deemed good for the net income criteria.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects the amount of cash generated by a company's regular operating activities. It's crucial as it indicates the core profitability of the business.

For InterDigital (IDCC), the CFO in 2023 stands at $213,733,000, which is positive, necessitating the addition of 1 point in the Piotroski analysis. Over the past two decades, InterDigital's operating cash flows have generally been positive, with 17 out of the last 20 years showing positive cash flow. This suggests a consistent ability to generate cash from its operational activities. The positive trend in the latest year is a positive indicator of the company's operational health.

Return on Assets (ROA) are growing?

The Return on Assets (ROA), measures a company's profitability relative to its total assets, indicating efficiency.

InterDigital's (IDCC) ROA increased from 0.0531 in 2022 to 0.1166 in 2023. This uptick indicates improved asset utilization and profitability, adding 1 point on the Piotroski scale. IDCC's ROA over 20 years ranged notably between -0.034 and 0.4307, whereas industry medians hovered around 0.55-0.60. Positive trend highlights fiscal proficiency.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is important because it indicates better quality of earnings, showing that profits are supported by actual cash flows.

In 2023, InterDigital (IDCC) reported an Operating Cash Flow of $213.73 million compared to a Net Income of $214.07 million. Given that the Operating Cash Flow is slightly lower than Net Income, the trend is rather neutral for the quality of earnings criterion in Piotroski analysis. Historically, their Operating Cash Flow has fluctuated significantly, peaking at $430.78 million in 2016, but often trailing their Net Income. Considering the additional data, the company shows some inconsistency in converting its profits into cash, which assigns it 0 points on this criterion for 2023.

Liquidity of InterDigital (IDCC)

Leverage is declining?

The Change in Leverage indicates how the financial risk of a company is managing its debt levels. It is important to monitor if the company is increasing or decreasing its leverage, which can impact creditworthiness.

For InterDigital (IDCC), the leverage ratio in 2022 stood at 0.33, significantly increasing from 0.0262 in 2023. This upward trend in leverage suggests a greater dependence on debt to finance its operations. Over the past two decades, a historical analysis of InterDigital’s leverage shows fluctuations with a significant peak in 2012 at 0.1931, but the recent numbers indicate an alarming rise. This trend is concerning because higher leverage poses increased financial risk to stakeholders. Therefore, for the Piotroski analysis, where reduced leverage is favorable, InterDigital does not score a point in this criterion.

Current Ratio is growing?

The Current Ratio measures a company’s ability to cover its short-term liabilities with its short-term assets. A higher ratio indicates better liquidity.

In 2023, InterDigital's (IDCC) Current Ratio stands at 1.3251, significantly lower than the 4.9556 reported in 2022. This represents a decrease, thus earning a score of 0 by the Piotroski F-Score criteria. Historically, InterDigital’s Current Ratio has hovered above the industry median, which has consistently been below 1, highlighting a generally stronger liquidity position. However, the sharp drop in 2023 raises concerns about the company’s short-term financial stability, as a Current Ratio nearing 1 suggests limited capacity to cover short-term liabilities, a stark divergence from its previous stronger liquidity profile.

Number of shares not diluted?

Change in Shares Outstanding compares the number of shares a company has issued over a certain period. It can be an indicator of dilution or consolidation.

In the case of InterDigital (IDCC), the number of outstanding shares decreased from 30,106,000 in 2022 to 26,860,000 in 2023. Under the Piotroski score, a decrease in outstanding shares merits a positive signal, adding 1 point. This is generally seen as favorable because it suggests the company may be engaging in share buybacks, reducing dilution and potentially increasing the value per share. The data shows a definitive downward trend in outstanding shares over the last 20 years, decreasing from 59,691,000 in 2003 to 26,860,000 in 2023. This consistent reduction in outstanding shares is generally a positive sign, indicating strategic buybacks and/or consolidation efforts.

Operating of InterDigital (IDCC)

Cross Margin is growing?

Gross Margin measures the proportion of revenue remaining after deducting the cost of goods sold. A higher Gross Margin indicates greater efficiency in converting revenue into profit.

In the case of InterDigital (IDCC), the Gross Margin increased from 0.844 in 2022 to 0.8555 in 2023. This reflects a positive trend and adds one point in the Piotroski F-Score. The Gross Margin in 2023 is also significantly higher than the industry's median margin of 0.6122, demonstrating InterDigital's superior efficiency in managing its production costs. The historical trend shows notable fluctuations, but the current margin is one of the highest in the last two decades, suggesting robust performance.

Asset Turnover Ratio is growing?

Asset turnover measures a firm's efficiency in using its assets to generate revenue. Higher values signify greater efficiency.

Asset Turnover for InterDigital (IDCC) has increased from 0.2595 in 2022 to 0.2994 in 2023. Adding 1 point for this criterion is warranted due to this positive change. Historically, the highest asset turnover for IDCC in the last two decades was 1.1127 in 2006, while the lowest was 0.1766 in 2018. The recent increase, although modest, shows improvement in how effectively the company is utilizing its assets to generate sales. Thus, this upward trend, although still at a lower efficiency level than historical peaks, is a positive indicator.