Last update on 2024-06-07

Ligand Pharmaceuticals (LGND) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Ligand Pharmaceuticals (LGND) Piotroski F-Score Analysis 2023: Assessing profitability, liquidity, and leverage. Final Score: 6/9. A deep dive for investors.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score evaluates a company's financial health based on 9 criteria such as profitability, liquidity, and leverage. Ligand Pharmaceuticals (LGND) received a score of 6. Detailed evaluation demonstrates positive net income ($52,154,000) and operational cash flow ($49,577,000) in 2023, and improved Return on Assets (ROA) from -0.0324 in 2022 to 0.0673 in 2023. However, operating cash flow is less than net income, leverage has increased, shares outstanding have increased, and asset turnover ratio has decreased. Despite these issues, the current ratio improved significantly and gross margin increased to 0.9199.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 6, Ligand Pharmaceuticals shows several strengths like positive cash flow and net income, but also has concerns such as increased leverage and diluted shares. While it may be worth investigating for its profitability and current ratio improvements, investors should closely watch its leverage and asset turnover issues. Therefore, this stock could be a cautious buy with attention to financial stability.

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

Profitability of Ligand Pharmaceuticals (LGND)

Company has a positive net income?

Net income measures a company's total earnings (or profit). It's a key indicator of financial health and profitability.

For 2023, Ligand Pharmaceuticals (LGND) posted a net income of $52,154,000. This positive net income not only adds one point to our Piotroski analysis score but also indicates profitable operations for the year. Over the past 20 years, LGND has experienced fluctuations with some years of negative net income, such as in 2008 (-$98,114,000) and 2022 (-$33,361,000). However, it has also seen substantial positive spikes, such as in 2007 ($281,688,000) and 2019 ($629,302,000). The positive net income trend in 2023 is favorable, showcasing recovery and profitability.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) criterion assesses whether a company is generating positive cash flow from its core business operations, indicating its ability to generate sufficient funds to maintain and grow the business.

For 2023, Ligand Pharmaceuticals (LGND) reported a CFO of $49,577,000, which is positive. This positive CFO suggests that the company is generating sufficient cash from its core operations, a good indicator of financial health. Over the past 20 years, the CFO has shown a mixed trend with significant fluctuations, including several years of negative values. However, the recent trend from 2020 onwards appears to be positive, which bodes well for the company's operational stability. Thus, LGND scores 1 point for this criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures how effectively a company is turning its investments into profit. A positive change signifies improvement.

Ligand Pharmaceuticals (LGND) has demonstrated a significant improvement in its Return on Assets (ROA), moving from -0.0324 in 2022 to 0.0673 in 2023. This positive shift translates into a 1-point score under the Piotroski F-Score model. To comprehensively assess this trend, consider the historical ROA data. Over the last 20 years, the company's ROA has fluctuated, but 2023's figures are a marked improvement. This is a favorable sign as it indicates better asset utilization and potentially stronger profitability moving forward. Despite the positive trend, it's important to note that the industry median ROA stands at 0.4518 for 2023, suggesting that while Ligand has improved, it still trails behind its industry peers substantially. This gap highlights the need for continued efforts to enhance operational efficiency to be more competitive in the sector.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income

With Ligand Pharmaceuticals (LGND), the operating cash flow for 2023 is $49,577,000, whereas the net income is $52,154,000. Therefore, the operating cash flow is lower than the net income, resulting in a score of 0 for this criterion. Enrolling this point illustrates that Ligand Pharmaceuticals is not ideally converting its revenues into actual cash. It is crucial to note that net income can contain non-cash elements, while operating cash flow reflects the actual cash-generating ability of a company’s core business operations. While acknowledging this indicator, historical context will be valuable. Indeed, the trend from the past 20 years relevant data exemplifies variations in cash flow from operations with figures oscillating from negative an astounding -$138.5 million in 2006 to positive usages, designated values such as 193.681 million in 2018 indicating significant volatility. Meanwhile, the corresponding net income for these timeframes similarly shows major fluctuations, indicative of sporadic profit registration phases. Specifically in 2019, a heightened net income of $629.3 million contrasts markedly against former loss recordings like $107.3 million in 2008, portraying an unsteady uptrend with accumulations and deficits alternately arising. The discussion point here roots stronger in focusing on continuously assessing such fiscal parameters synchronously for offering deeper strategic insights.

Liquidity of Ligand Pharmaceuticals (LGND)

Leverage is declining?

This criterion examines whether a company has reduced its leverage compared to the previous year. A decrease in leverage indicates lower risk and potentially a stronger financial position.

Comparing Ligand Pharmaceuticals' leverage, it stands at 0.0136 in 2022 and increased to 0.0073 in 2023. This trend suggests that the company has increased its leverage, which is usually an unfavorable sign as higher debt levels can add financial stress by increasing obligations and interest payments. Over the past 20 years, Ligand's leverage has fluctuated, peaking as high as 0.5645 in 2003 and hitting a low of 0.0000 multiple times, most recently in 2014. In light of its history, the recent increase in leverage might concern investors who prefer companies with declining or stable leverage. Consequently, this criterion results in 0 points given the increase in leverage.

Current Ratio is growing?

The Current Ratio analyzes a company's ability to pay short-term obligations with its short-term assets. A higher ratio indicates better liquidity.

For Ligand Pharmaceuticals (LGND), the Current Ratio surged from 2.6678 in 2022 to a whopping 14.1478 in 2023. This significant increase is a positive signal, adding 1 point to the Piotroski score. Historically, we see fluctuating current ratios within the company, notably a spike in 2015 at 10.3461 and an even larger 66.089 in 2019. When compared to the industry median, Ligand had generally been below the industry average but has now overshot it significantly. This suggests vastly improved short-term liquidity, although such a drastic climb warrants scrutiny regarding its sustainability and whether it could signify an inefficiency in asset utilization.

Number of shares not diluted?

Change in Shares Outstanding examines whether a company has been diluting its shares, which can impact shareholder value.

For Ligand Pharmaceuticals (LGND), the Outstanding Shares increased from 16,868,000 in 2022 to 17,298,000 in 2023. This increase means no points are added in this criterion. Historically, LGND's Outstanding Shares have consistently fluctuated, with spikes observed in 2007 and 2018 at 16,354,154 and 23,480,537 shares, respectively. Such an increase often results in shareholder dilution, which can be detrimental to investors because it can decrease the value of each individual share.

Operating of Ligand Pharmaceuticals (LGND)

Cross Margin is growing?

Gross Margin indicates the percentage of revenue after accounting for COGS, crucial for assessing profitability.

Ligand Pharmaceuticals (LGND) exhibited a Gross Margin of 0.9199 in 2023 compared to 0.7308 in 2022, marking an increase. The upward trend reflects improved operational efficiency or pricing power, beneficial for the firm's profitability. Given the rise, Ligand earned one point for this Piotroski criterion. Comparatively, Ligand's Gross Margin outperformed the industry median of 0.4518 by a significant margin, further underscoring its robust financial health.

Asset Turnover Ratio is growing?

The criterion compares the company's revenue-generating ability relative to its asset base.

Upon analyzing Ligand Pharmaceuticals' asset turnover ratio for the years 2022 and 2023, we observe a decline from 0.1905 in 2022 to 0.1695 in 2023. This change represents a reduction in asset use efficiency. Looking at the historical data spanning 20 years, the company has shown fluctuations in asset turnover but had relatively higher ratios during most of the years. Therefore, Ligand Pharmaceuticals does not earn a point in this criterion, as the efficiency in asset utilization has decreased.