Last update on 2024-06-06

KLA (KLAC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Discover KLA (KLAC)'s Piotroski F-Score for 2023. Detailed financial performance analysis with 5/9 score indicating modest strengths and weaknesses.

Short Analysis - Piotroski Score: 5

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

KLA (KLAC) was analyzed using the Piotroski F-Score, a system that rates a company's financial strength from 0 to 9 based on nine criteria. KLA achieved a score of 5 out of 9, indicating a mixed performance. The company excelled in some areas, like positive net income, positive cash flow from operations exceeding net income, and decreasing leverage. However, it showed weaknesses in return on assets, current ratio, gross margin, and asset turnover ratio.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 5, KLA (KLAC) shows moderate financial health. While it demonstrates strengths in profitability and reducing debt, it faces challenges in operational efficiency and liquidity. Investors might consider this stock for its strong earnings and cash flow, but should also weigh the potential risks due to its declining return on assets and lower current ratio. It may be worth further investigation, especially if the investor is comfortable with moderate risk exposure.

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

Profitability of KLA (KLAC)

Company has a positive net income?

A positive net income is crucial as it indicates that a company is profitable and generating more revenue than expenses.

For 2023, KLA (KLAC) reported a net income of $3,387,277,000, marking a positive trajectory compared to previous years. Looking at the past 20 years, KLAC has demonstrated resilience and growth. Apart from a significant loss in 2009 (-$523,368,000), the company has consistently stayed profitable, particularly noting growth from $137,191,000 in 2003 to $3,387,277,000 in 2023. The positive net income for 2023 adds one point based on the Piotroski criterion and underscores KLAC's profitability streak.

Company has a positive cash flow?

CFO measures the cash a company generates from its regular operating activities, indicating its efficiency in core business functions.

In 2023, KLA reported a positive CFO of $3,669,805,000. This substantial sum not only reflects the firm's robust operational efficiency but also signals a healthy cash flow, which is vital for covering debts, paying dividends, and facilitating expansion. Analyzing the last 20 years, KLA's cash flow from operations has shown a consistent upward trajectory, particularly from 2016 onwards—demonstrating financial strength and resilience. Given the positive CFO for 2023, KLA earns 1 point for this criterion.

Return on Assets (ROA) are growing?

Change in ROA measures the year-over-year change in return on assets and reflects management's efficiency

In 2023, KLA reported an ROA of 0.254 compared to 0.2905 in 2022. This represents a decline, yielding 0 points. Historically, KLA’s ROA trend has seen fluctuation; the notable drop in 2023 is a setback as a higher ROA implies more efficient asset usage. The industry median ROA in 2023 stands at 0.4718, suggesting KLA's performance is significantly below its peers. This downward trend highlights areas for analysis and potential efficiency improvements.

Operating Cashflow are higher than Netincome?

This criterion evaluates whether a company's operating cash flow surpasses its net income, an indicator of high-quality earnings.

In 2023, KLA's operating cash flow stood at $3,669,805,000, while its net income was $3,387,277,000. The operating cash flow is indeed higher than the net income, earning KLA 1 point. This trend is favorable as it indicates that the company's earnings are supported by robust cash flows. Historical data indicates that KLA has consistently maintained healthy operating cash flows over the past two decades, with the 2023 figure being the highest yet. This reinforces investor confidence in the quality and sustainability of KLA's earnings.

Liquidity of KLA (KLAC)

Leverage is declining?

This criterion evaluates the change in the company's leverage ratio from one period to the next. A decrease in leverage is generally seen as a positive signal as it indicates a reduction in risk associated with debt.

Based on the given values, KLA's leverage ratio decreased from 0.5352 in 2022 to 0.4284 in 2023. This indeed represents a reduction in leverage, which is typically a positive sign, reflecting better financial health and reduced risk from indebtedness. Therefore, KLA earns 1 point according to the Piotroski F-Score criterion for change in leverage. Reviewing the last 20 years of leverage data for KLA demonstrates fluctuations with noticeable peaks around the 2015-2016 and 2019-2020 periods. The recent downtrend in leverage continues a positive trajectory post the 2019-2020 peak, indicating effective debt management and a possible enhancement in the company's creditworthiness.

Current Ratio is growing?

Current Ratio measures a company's ability to pay short-term obligations with its short-term assets. It's critical for assessing liquidity.

KLA's (KLAC) Current Ratio decreased from 2.4969 in 2022 to 2.2368 in 2023, signaling a decline in liquidity. The firm’s 2023 ratio is significantly below the 20-year average industry median of 3.161, underscoring a potential concern in its ability to meet short-term liabilities compared to peers. Given the observed decrease, we set the point to 0.

Number of shares not diluted?

The change in shares outstanding assesses whether a company is buying back its own stock. A decrease is often viewed positively as it indicates management's belief in the value of the company and can increase EPS.

For KLA (KLAC), the outstanding shares decreased from 150,494,000 in 2022 to 139,483,000 in 2023. This represents a reduction of approximately 7.32% year-over-year. Furthermore, looking at the long-term trend over the past 20 years, the company's outstanding shares have generally declined from 194,785,000 in 2003 to 139,483,000 in 2023. This steady reduction suggests a consistent buyback program which is often seen as a shareholder-friendly action that can lead to increased earnings per share (EPS) by reducing the number of shares amongst which profits are divided. Hence, KLA gains 1 point for this criterion.

Operating of KLA (KLAC)

Cross Margin is growing?

Change in Gross Margin compares the profitability percentage of net sales remaining after direct costs, reflecting the company’s cost control. An Increase adds 1 point, a decrease adds 0 points.

KLA (KLAC) witnessed a reduction in its Gross Margin from 0.61 in 2022 to 0.5981 in 2023. Despite this small decrease, KLAC's margins have been significantly above the industry median consistently over the years. For instance, in 2022, the industry's median was 0.4654 while KLAC was significantly higher at 0.61. However, in strict terms, a decline in Gross Margin results in 0 points. Overall, while not indicative of acute issues, this trend points toward a slight decline in cost efficiency.

Asset Turnover Ratio is growing?

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

For KLA (KLAC), the asset turnover ratio slightly decreased from 0.8056 in 2022 to 0.7871 in 2023. This decline of approximately 2.3% indicates a minor reduction in the company's efficiency at generating revenue from its assets. Despite overall variations over the last 20 years, with asset turnover ratios ranging from a low of 0.3595 in 2009 to a peak at 0.8056 in 2022, it is important to monitor this trend closely. Consequently, no point is awarded for this criterion for 2023. The trend suggests management should analyze factors contributing to this inefficiency.