Last update on 2024-06-07

Interpublic Group of Companies (IPG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Interpublic Group of Companies (IPG) financial analysis using Piotroski F-Score for 2023. Final score: 7/9, indicating strong financial health.

Short Analysis - Piotroski Score: 7

We're running Interpublic Group of Companies (IPG) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score model is used to evaluate the financial health of a company on a scale from 0 to 9 based on nine criteria related to profitability, liquidity, and operating efficiency. The Interpublic Group of Companies (IPG) received a Piotroski F-Score of 7, denoting a robust financial position. Key Highlights: - Positive net income of $1.098 billion for 2023. - Positive cash flow from operations (CFO) at $554.7 million. - Growth in Return on Assets (ROA) from 0.0484 in 2022 to 0.0577 in 2023. - Current Ratio increased to 1.06 in 2023, suggesting improved liquidity. - A reduction in the outstanding shares from 391.5 million in 2022 to 384.1 million in 2023. - A slight drop in Gross Margin from 0.1688 in 2022 to 0.1666 in 2023. - Asset Turnover Ratio rose slightly from 0.5644 in 2022 to 0.5719 in 2023. However, there are concerns about IPG's lower liquidity efficiency due to its operating cash flow being less than net income, and unfavorably low Gross Margin when compared to industry standards.

Insights for Value Investors Seeking Stable Income

Based on the received Piotroski F-Score of 7, Interpublic Group of Companies (IPG) is generally performing well financially and is a strong candidate for investment. While there are areas for improvement such as Gross Margin and cash flow efficiency, the company's profitability, liquidity, and asset management indicate it is worth consideration for investors looking for stable and undervalued stocks.

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

Profitability of Interpublic Group of Companies (IPG)

Company has a positive net income?

Net income measures a company's total earnings, reflecting both revenue and expenses. Positive net income is crucial for long-term sustainability and growth.

For 2023, Interpublic Group of Companies (IPG) reported a net income of $1,098,400,000, which marks a positive net income and results in accruing 1 point. Observing the 20-year trend, the company faced net losses in the early 2000s but has shown significant recovery and consistent positive net income from 2007 onwards. This upward trend denotes financial stability and robust performance, which is favorable for investors.

Company has a positive cash flow?

Cash Flow from Operations (CFO) represents the amount of cash generated by a company's regular operating activities.

For 2023, Interpublic Group of Companies (IPG) shows a positive CFO at $554.7 million. This positive figure is a favorable indication for the health of IPG's core operations, earning it 1 point in the Piotroski F-score. Historically, IPG has also displayed strength in generating positive operating cash flows, like the notable highs in 2019 ($1.529 billion), 2020 ($1.847 billion), and 2021 ($2.076 billion). Despite the dip in recent years, consistently positive CFO reflects robust operational efficiency.

Return on Assets (ROA) are growing?

Change in ROA is a metric that helps in understanding if the company is increasing its profitability relative to its assets over time.

Interpublic Group of Companies (IPG) shows an increase in ROA from 0.0484 in 2022 to 0.0577 in 2023. This upward trend is a positive signal as it indicates that the company is becoming more efficient in generating profits from its assets. This trend is good for the company and adds 1 point in the Piotroski scale. The historical data indicates varying levels of ROA, but a recent upward trend boosts investor confidence.

Operating Cashflow are higher than Netincome?

Operating cash flow should surpass net income as it signifies strong liquidity and efficient operations.

In 2023, Interpublic's operating cash flow was $554.7 million whereas net income was significantly higher at $1,098.4 million. This divergence is indicative of lower liquidity efficiency. A pattern of operating cash flow consistently trailing net income over the years might signal potential reliability concerns in reported earnings or greater non-cash profitability, hence implying a 0 score according to Piotroski criteria. Historically, since 2003, Interpublic's operating cash flow has exhibited substantial variability, peaking notably in 2019 ($1,529.2 million). Nevertheless, despite considerable annual fluctuations, operating cash flows have exhibited resilience.

Liquidity of Interpublic Group of Companies (IPG)

Leverage is declining?

Leverage measures the amount of debt a company uses to finance its assets, reflecting financial risk.

Between 2022 and 2023, Interpublic Group of Companies (IPG) saw an increase in leverage from 0.226 to 0.2146, amounting to an effective leverage of 0 in Piotroski Analysis terms due to the increase. However, examining historical data over the past two decades reveals leverage fluctuating relatively constantly, particularly with lows around 0.0875 in 2013 and highs at 0.2367 in 2019. Recent trends had seen a dip since 2020's 0.2415, illustrating that while 2023 shows increased leverage, the change aligns with a typical behavior range. This recent data shows a larger tendency towards reducing leverage following the significantly heightened trends in 2018 and 2019. Yet, maintaining a scrutinizing approach to even a perceived small deviation could flag uptyle overlooking steady past progresses.

Current Ratio is growing?

The Current Ratio is a liquidity measure that indicates a company's ability to pay off its short-term liabilities with its short-term assets. A higher Current Ratio suggests better liquidity and financial health.

Interpublic Group of Companies (IPG) saw an increase in its Current Ratio from 1.0343 in 2022 to 1.06 in 2023, earning it 1 point according to the Piotroski Analysis criteria. This trend indicates an enhancement in IPG's liquidity position. Over the years from 2003 to 2023, the company's Current Ratio has shown fluctuations, with the highest ratio being 1.1346 in 2012 and the lowest being 0.931 in 2019. Comparatively, the industry's median Current Ratio for 2023 stands at 1.1433, higher than IPG's. Nonetheless, the increment in 2023 marks a positive trend for IPG, signaling an improvement in its capacity to meet short-term obligations.

Number of shares not diluted?

Change in shares outstanding measures whether a company is buying back its shares or issuing more. A reduction in shares outstanding is often viewed positively.

In 2023, the outstanding shares of Interpublic Group of Companies (IPG) were 384.1 million, down from 391.5 million in 2022. This decline implies that the company has repurchased shares, leading to a point being added according to the Piotroski metric. Historically, looking at the past 20 years data, the shares outstanding have generally trended downward from a peak of 542.1 million shares in 2010 to the current 384.1 million in 2023. This consistent share repurchase strategy reflects positively on the company’s efforts to return value to shareholders and is part of a larger trend of capital efficiency.

Operating of Interpublic Group of Companies (IPG)

Cross Margin is growing?

Gross Margin examines the efficiency of a company in producing goods and services relative to its revenue. A rising Gross Margin suggests better efficiency in production or improved cost management, impacting overall profitability.

For Interpublic Group of Companies (IPG), the Gross Margin in 2023 was 0.1666, slightly lower than the 0.1688 recorded in 2022. Despite this small drop, evaluating IPG's historical data reveals fluctuating Gross Margins, including notably higher margins around 2010. Furthermore, comparing these numbers with the industry median, which was much higher at 0.4568 in 2023, shows that IPG's margin is significantly below the industry standard. This trend is not favorable and highlights the need for enhanced operational efficiency or cost control to improve its competitiveness. Therefore, the Gross Margin notably decreased, awarding no points for this criterion.

Asset Turnover Ratio is growing?

Asset turnover measures the efficiency of a company's use of its assets in generating sales revenue.

In 2023, Interpublic Group of Companies (IPG) recorded an asset turnover of 0.5719, which is a slight increase from the 0.5644 recorded in 2022. This positive development, albeit modest, implies an enhanced effectiveness in utilizing assets to generate revenue. In the long-term context, the current ratio still places IPG within a good range relative to historical performance, as the last 20 years have seen fluctuations. For instance, 2009's asset turnover dipped to 0.4943 and reached a high of 0.6862 in 2018. Thus, based on this incremental improvement, IPG earns 1 point.