Last update on 2024-06-07

Deutsche Lufthansa (LHA.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Comprehensive analysis of Deutsche Lufthansa's financial health for 2023 using the Piotroski F-Score. Final score: 7/9, indicating strong financial performance.

Short Analysis - Piotroski Score: 7

We're running Deutsche Lufthansa (LHA.DE) 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 that examine profitability, liquidity, and efficiency. Deutsche Lufthansa achieved a Piotroski Score of 7 out of 9 for 2023, indicating strong but improvable financial health. The profitability metrics show positive net income (€1.673 billion), positive operating cash flow (€4.945 billion), and an increasing Return on Assets (ROA) from 0.0184 to 0.0377 over the previous year. These highlight a significant recovery from pandemic losses. Lufthansa also excels in having higher operating cash flow versus net income, which indicates better earnings quality.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 7, Deutsche Lufthansa (LHA.DE) exhibits strong financial health and recovery signs, which make it worth consideration for potential investment. However, be aware of its relatively high debt levels and fluctuating liquidity, as indicated by a declining current ratio. Therefore, while Lufthansa shows great promise, potential investors should keep an eye on its leverage and liquidity metrics before making any decisions.

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

Profitability of Deutsche Lufthansa (LHA.DE)

Company has a positive net income?

Assessing net income for Deutsche Lufthansa determines the company's overall profitability for a given period.

For 2023, Deutsche Lufthansa reported a net income of €1,673,000,000, marking a positive value. This is an excellent indication considering the company's tumultuous journey over the past years, including massive losses of €-6,725,000,000 in 2020 amid the pandemic. Compared to 2022's €791,000,000, there's a significant increase, reinforcing a strong comeback. Thus, for 2023, this adds 1 point to the Piotroski F-Score.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects a company's ability to generate sufficient positive cash flow to maintain and grow its operations. This is crucial for assessing financial health.

For Deutsche Lufthansa (LHA.DE), the CFO in 2023 stands at €4.945 billion, indicating a positive cash flow. A positive CFO suggests that Lufthansa is generating sufficient cash from its core business activities. This trend is definitely good for the airline, reflecting robust operational efficiency and potentially better liquidity management. Analyzing historical CFO data shows volatility, particularly the significant dip in 2020, most likely due to the COVID-19 pandemic and its impact on global air travel. The recovery to €4.945 billion in 2023 is an encouraging sign of Lufthansa's resilience and business acumen. Therefore, it scores 1 point in the Piotroski Analysis for positive Cash Flow from Operations.

Return on Assets (ROA) are growing?

The Change in Return on Assets (ROA) criterion involves comparing the ROA of this year to that of the previous year. If the ROA shows an increasing trend, it indicates improving profitability and operational efficiency. This is an important metric because it reflects how effectively a company is utilizing its assets to generate earnings, which can influence investor decisions.

For Deutsche Lufthansa (LHA.DE), the ROA increased from 0.0184 in 2022 to 0.0377 in 2023. This positive change shows that Lufthansa successfully improved its asset utilization efficiency over the past year, meriting the assignment of 1 point for this criterion. This improvement is crucial, especially when considering the company's performance across 20 years where the operating cash flow has varied significantly, reflecting periods of economic and sectoral volatility. While the industry median ROA in 2023 is considerably higher at 0.198, Lufthansa's increase in ROA still represents an important step in aligning more closely with industry standards and improving stakeholder confidence.

Operating Cashflow are higher than Netincome?

Evaluate whether Deutsche Lufthansa's operating cash flow is higher than its net income for 2023 and the implications.

The Operating Cash Flow for Lufthansa in 2023 stands at €4,945,000,000 while the Net Income is €1,673,000,000. The Operating Cash Flow is substantially higher than the Net Income, which is a positive indicator and earns a point in the Piotroski Analysis. This scenario signifies high-quality earnings as it indicates that the company generates enough cash to cover its net income. Historically, Lufthansa's operating cash flow has exhibited significant fluctuation, with notable positive peaks such as €5,168,000,000 in 2022 and €5,035,000,000 in 2017. The sustained high Cash Flow from Operations, despite periodic volatility, portrays an efficient operational strategy.

Liquidity of Deutsche Lufthansa (LHA.DE)

Leverage is declining?

Leverage measures a company's debt relative to its equity. Lower leverage indicates less financial risk.

Leverage increased from 0.3062 in 2022 to 0.2439 in 2023 for Deutsche Lufthansa. In the last 20 years, leverage has fluctuated, with highs of 0.3536 in 2021 and lows around 0.05 in 2018. Despite recent improvements, the leverage is still relatively high, indicating significant debt levels. No point is awarded since leverage increased.

Current Ratio is growing?

Current Ratio refers to a company's ability to pay off its short-term liabilities with its short-term assets. It is an important liquidity ratio that indicates the financial health of a business. For Deutsche Lufthansa, a higher current ratio compared to the previous year shows an improvement in its ability to meet short-term obligations.

In 2023, Deutsche Lufthansa's current ratio decreased to 0.7873 from 0.8615 in 2022. This decline indicates that the company's ability to cover its short-term liabilities with short-term assets has weakened, which can be a red flag for investors considering liquidity risk. Despite this year's fall, it is crucial to note that Lufthansa's current ratio in previous years fluctuated notably: from a low of 0.621 in 2014 to a high of 0.9259 in 2016. Comparing these figures to the industry median current ratio of 0.8112 in 2023, Lufthansa lags slightly behind, reinforcing a conservative stance on its liquidity position. Given this trend, this criterion would be assigned a point of 0.

Number of shares not diluted?

Evaluating changes in shares outstanding involves determining if a company has reissued or repurchased shares, impacting ownership concentration.

In comparing Deutsche Lufthansa's shares outstanding, we observe an increase from 1,195,485,644 shares in 2022 to 1,195,534,545 in 2023. This increment indicates a minor dilution effect, with outstanding shares growing by 48,901. Over a historical tract of 20 years, Lufthansa's shares outstanding have fluctuated, showing large jumps particularly in recent years, potentially as a strategic move to raise capital amidst volatile economic conditions.

Operating of Deutsche Lufthansa (LHA.DE)

Cross Margin is growing?

Gross Margin measures the financial health and efficiency in using its resources. An increasing margin signifies better profitability.

The Gross Margin for Deutsche Lufthansa has increased from 0.1315 in 2022 to 0.1479 in 2023, resulting in an addition of 1 point. This is a positive trend and indicated better cost management and higher profitability. In comparison, the industry median Gross Margin is 0.198 in 2023, reflecting Deutsche Lufthansa is still below the industry average, but it shows steady improvement.

Asset Turnover Ratio is growing?

Asset Turnover measures a firm's efficiency in using its assets to generate sales. An increase indicates improved efficiency.

Comparing Deutsche Lufthansa's Asset Turnover of 0.7995 in 2023 to 0.7196 in 2022, we see an increase. This suggests improved operational efficiency. Historically, Lufthansa's Asset Turnover was much higher, even above 1.0 before 2016. The recent increase marks recovery post-pandemic. Thus, for this criterion, Lufthansa gets 1 point. This recovery trend is particularly positive as it indicates the company's adaptive measures are yielding results.