Last update on 2024-06-06

Keysight Technologies (KEYS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Analyzing Keysight Technologies' (KEYS) financial health using the Piotroski F-Score reveals strengths in profitability and liquidity with a final score of 6/9.

Short Analysis - Piotroski Score: 6

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

Keysight Technologies (KEYS) has a Piotroski F-Score of 6, indicating moderate financial health based on a recent analysis. Here's a breakdown: - **Profitability:** Positive net income and cash flow, but a slight decline in Return on Assets (ROA). - **Liquidity:** Decrease in leverage, but a downturn in the current ratio suggests weakening short-term liquidity. - **Operating Efficiency:** Improvements in gross margin but declines in asset turnover and ROA. Overall, the company's profitability and debt management are strong, but there are areas of concern, particularly in liquidity and asset efficiency.

Insights for Value Investors Seeking Stable Income

Keysight Technologies has solid profitability and strong debt management, making it a potentially good investment. However, the declines in asset efficiency and short-term liquidity could pose risks. Investors should keep an eye on these factors and consider them before making any investment decisions.

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

Profitability of Keysight Technologies (KEYS)

Company has a positive net income?

Net income is the profits of a company after all expenses are deducted from revenues.

In 2023, Keysight Technologies recorded a net income of $1,057,000,000 which is positive. Over the last 20 years, Keysight Technologies' net income has generally trended upwards, with notable increases from 2017 onwards. The continuous profitability marks the resilience and growth of the company, which is favorable. Thus, this criterion scores 1 point.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the amount of cash a company generates from its regular operating activities.

For Keysight Technologies (KEYS), the CFO in 2023 is $1,408,000,000. This is a positive value, thus adding 1 point according to Piotroski's criteria. Over the past 13 years, Keysight's CFO has shown a generally increasing trend from $751,000,000 in 2011 to $1,408,000,000 in 2023. This consistent increase in CFO is a positive sign, indicating robust operational efficiency and solid revenue conversion into cash. Therefore, the trend is good for this Piotroski criterion.

Return on Assets (ROA) are growing?

The Change in Return on Assets (ROA) criterion measures a company's ability to efficiently utilize its assets to generate net income over a certain period.

Keysight Technologies (KEYS) saw a decrease in ROA from 0.1416 in 2022 to 0.126 in 2023. Because the ROA did not increase, this results in 0 points for this criterion. This decline, though not drastic, is noteworthy as it indicates a slight reduction in the company's efficiency in using its assets to generate profit. An industry median ROA of 0.4813 in 2023 further contextualizes this performance, suggesting that Keysight is well below the industry average. The 20-year trend data shows fluctuations in operating cash flow, but a marked increase in 2023, which makes the reduction in ROA even more significant. It is essential for Keysight to investigate underlying reasons behind this drop to improve future efficiency and competitive positioning.

Operating Cashflow are higher than Netincome?

This criterion evaluates whether a company's operating cash flow exceeds its net income. It is pivotal because operating cash flow reflects the actual cash generated by the firm's core business operations, while net income includes non-cash items and can be influenced by accounting practices.

For Keysight Technologies (KEYS) in 2023, the operating cash flow is $1.408 billion compared to a net income of $1.057 billion. This results in a difference wherein the operating cash flow exceeds the net income by $351 million. This trend is favorable as it indicates robust cash generation capability from the firm’s primary operations. Over the years, this positive disparity has been more frequent than not, underlining a strong operational cash basis.

Liquidity of Keysight Technologies (KEYS)

Leverage is declining?

Leverage is the ratio of a company's total debt to its total assets. It is a critical criterion as it gives insights into a company's financial structure and its ability to meet long-term obligations.

For Keysight Technologies (KEYS), the leverage ratio decreased from 0.2444 in 2022 to 0.1597 in 2023. This decrease indicates that the company has reduced its debt relative to its assets, which is a positive trend. Historically, the leverage ratio of KEYS has shown volatility, reaching a high of 0.3603 in 2014 and maintaining lower levels since 2018. A reduction in leverage generally implies increased financial stability and reduced risk, thus earning KEYS a score of 1 point in this criterion.

Current Ratio is growing?

Change in Current Ratio reflects the ability of the company to cover short-term liabilities with short-term assets and is a key indicator of financial health.

Keysight Technologies' Current Ratio has decreased from 3.0092 in 2022 to 2.347 in 2023. Therefore, no point is awarded according to the Piotroski Analyses criteria. This downward trend may suggest increasing liquidity concerns as the company's ability to cover short-term obligations has weakened. Historically, the 2023 Current Ratio is also below the industry median of 2.6482, adding another layer of concern. This marks a significant deviation from previous years where Keysight mostly held a strong comparative position.

Number of shares not diluted?

Change in shares outstanding is an indicator of how the company's financing strategy might affect shareholders.

In 2022, Keysight Technologies had 180,000,000 outstanding shares. In 2023, the number decreased to 178,000,000, indicating a drop in outstanding shares. This trend is good as it often reflects share buybacks, which can indicate management's confidence in the company's financial health. Therefore, 1 point is added. Compared to historical data, this decline follows a reverse trend, as the outstanding shares had been consistently increasing over the last 20 years with notable increases in 2017 and 2018. Such consistent share buyback reflects a positive sentiment toward the market value of the company.

Operating of Keysight Technologies (KEYS)

Cross Margin is growing?

The change in gross margin is a key indicator of a company's operational efficiency and profitability. An increase in gross margin suggests improved cost management.

Comparing the gross margin of Keysight Technologies (KEYS) in 2023, which is 0.6464, to its gross margin in 2022, which was 0.6365, we observe an increase. This rise in gross margin is significant as it indicates that Keysight Technologies has improved its ability to manage production costs relative to its revenue. Additionally, over the last 20 years, Keysight’s gross margin has consistently outperformed the industry median, further showcasing its strong operational efficiency. The 2023 gross margin not only represents an improvement over the previous year but also maintains the company’s trend of robust financial health.

Asset Turnover Ratio is growing?

Asset Turnover compares a company's sales to its asset base and shows how effectively the company's assets generate revenue.

The Asset Turnover for Keysight Technologies has decreased from 0.6827 in 2022 to 0.6512 in 2023. This decrease suggests that the company is generating less revenue for each dollar of asset in 2023 compared to the previous year. The score for this criterion would be 0. Over the last 13 years, the Asset Turnover has seen a significant reduction from its highest value of 3.1083 in 2012 to 0.6512 in 2023. This trend demonstrates a concerning long-term decline in asset efficiency. Such a downward trajectory could indicate that the company needs to reassess its strategy for asset deployment or improve operational efficiencies. Investors may perceive this negatively, as it hints at declining effectiveness in utilizing its asset base to generate sales.