Last update on 2024-06-05

Legrand (LRC.F) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Explore Legrand (LRC.F) 2023 Piotroski F-Score Analysis with a final score of 7/9. Delve into financial health indicators like net income, cash flow, and ROA.

Short Analysis - Piotroski Score: 7

We're running Legrand (LRC.F) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score for Legrand (LRC.F) is 7 out of 9, indicating strong financial health. The company's profitability is evident with a positive net income of €1,148,500,000 in 2023 and increasing ROA over the years. Legrand also shows positive cash flow and improved gross margins. However, slight concerns arise from decreased asset turnover and current ratios. Historically, Legrand had fluctuating leverage but has improved to a more stable ratio. Overall, Legrand performs well under the Piotroski criteria, demonstrating robust operational efficiency and liquidity despite some minor setbacks.

Insights for Value Investors Seeking Stable Income

Legrand (LRC.F) scores 7 out of 9 on the Piotroski F-Score, suggesting it is a solid and financially healthy company. The consistent rise in net income and positive cash flow are strong points. However, potential investors should keep an eye on the slight decline in the asset turnover and current ratio. Despite this, Legrand's overall strong performance and positive trends in profitability and liquidity make it a worthwhile consideration for investment.

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

Profitability of Legrand (LRC.F)

Company has a positive net income?

The criterion checks whether net income is positive or negative, signifying profitability. Positive net income indicates a profitable company, while a negative result shows unprofitability.

For Legrand (LRC.F), the net income in 2023 stands at €1,148,500,000, which is clearly positive. Over the last 20 years, Legrand has seen a significant upward trend in net income, moving from a loss of €159,100,000 in 2003 to a profit of €1,148,500,000 in 2023. This consistent rise showcases the company's strengthening profitability and effective management. The positive net income is a strong indicator of financial health, thus adding 1 point to the company's Piotroski score. This trend reflects well on the business model and operational efficiency of Legrand. It signals robust scalability and growing market presence, which are key considerations for investors.

Company has a positive cash flow?

A positive Cash Flow from Operations is essential as it shows the company is generating sufficient cash from its core business, indicating healthy financial performance.

Legrand (LRC.F) has exhibited a positive Cash Flow from Operations (CFO) of €1,836,400,000 in 2023, which adds 1 point according to the Piotroski F-Score. This positive trend is consistent with the company's historical performance, showing growth from €271,000,000 in 2003 to the current figure. The continuous increase over the years, particularly the significant jump in 2023, indicates strong operational efficiency and robust core business performance.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) criterion for Legrand assesses the company's efficiency in generating profits from its assets. It is pivotal for understanding the trend in operational performance.

For 2023, Legrand's ROA stands at 0.0785, compared to 0.0703 in 2022. This demonstrates an increment, thereby adding 1 point to the Piotroski score. This increase in ROA is a positive indicator, showing enhanced efficiency in using its asset base to generate earnings. Evaluating the past two decades, however, reveals a consistent pattern where Legrand's ROA trails the industry median, which ranged from 0.3154 to 0.3492. In particular, the industry median in 2023 was 0.3492, substantially higher than Legrand's. Although Legrand's increase is noteworthy, the company should strategize to bring its ROA closer to or exceed the industry's median to ensure superior competitive advantage.

Operating Cashflow are higher than Netincome?

Explain the criterion for Legrand (LRC.F) and why it is important to consider

In the Piotroski Analysis, comparing Operating Cash Flow (OCF) and Net Income is essential. If OCF is higher, it indicates good earnings quality, suggesting the company generates ample cash to sustain operations. This holds importance as cash inflow is crucial for a company's liquidity and ability to invest in growth opportunities.

Liquidity of Legrand (LRC.F)

Leverage is declining?

Change in Leverage measures the difference in company debt compared to its equity. Lower leverage usually indicates reduced financial risk.

The leverage ratio for Legrand has slightly decreased from 0.2785 in 2022 to 0.2755 in 2023. According to the Piotroski criteria, a decreased leverage ratio should add 1 point because it suggests a reduction in financial risk and a more solid capital structure. Therefore, the trend is good from a financial stability perspective. Historically, Legrand's leverage had increased from 2014 through 2021, reaching its highest points around 0.3024 in 2019 and 0.3156 in 2020. The current level, while higher than pre-2014 levels, shows a reduction over two years, demonstrating a conscious effort to manage debt levels effectively.

Current Ratio is growing?

The Current Ratio compares a company's current assets to its current liabilities, which crucially helps to evaluate the company's short-term liquidity and its ability to meet short-term obligations.

For Legrand (LRC.F), the Current Ratio has slightly decreased from 2.0447 in 2022 to 1.9842 in 2023, resulting in a score of 0 according to the Piotroski analysis criteria. While this dip is marginal, it suggests a slight deterioration in liquidity. Historically, Legrand has demonstrated fluctuating Current Ratios over the last 20 years, peaking at 2.016 in 2015 and hitting lows of around 0.86 in 2006. Comparatively, the industry median Current Ratio for 2023 stands at 1.7757, notably lower than Legrand's value, indicating Legrand still maintains superior liquidity compared to its peers despite the slight decrease.

Number of shares not diluted?

Change in Shares Outstanding considers if a company has prevented dilution by keeping shares outstanding stable or decreasing.

For 2023, Legrand (LRC.F) has experienced an increase in outstanding shares from 266,608,415 in 2022 to 0 in 2023. The absence of outstanding shares in 2023 may suggest corporate actions such as stock consolidation or reauthorization rather than straightforward dilution. Even though the raw data shows no shares outstanding in 2023, the trend over the last 20 years shows a general consolidation in shares from highs of over 759 million in earlier years to eventually holding steady around 266 million before 2023. By standard Piotroski criteria, since shares outstanding did not decrease, it earns a score of 0 for this category.

Operating of Legrand (LRC.F)

Cross Margin is growing?

A gross margin compares sales revenue to production costs, revealing profitability and cost efficiency. A rising gross margin highlights improved profitability and efficient resource use.

From 2022 to 2023, Legrand's gross margin rose from 0.4972 to 0.5226, an increase of 0.0254 or approximately 5.11%. This earns Legrand 1 Piotroski point as it indicates improved profitability, showcasing efficient resource utilization. Historically, Legrand has fared consistently better than the industry median gross margin. For instance, in 2023, the industry's median gross margin sat at 0.3492, significantly below Legrand's 0.5226. Such trends underscore Legrand's enduring competitive advantage and operational strength over two decades.

Asset Turnover Ratio is growing?

Change in Asset Turnover measures the efficiency of a company in utilizing its assets to generate sales. An increase signifies better performance.

In 2023, Legrand (LRC.F) recorded an Asset Turnover ratio of 0.5754 compared to 0.5864 in 2022. This reflects a slight decrease, resulting in a score of 0 for this Piotroski criterion. Looking at the historical data, Legrand's Asset Turnover has shown fluctuations but has typically ranged between 0.4933 (2020) and 0.6855 (2007). The current level is towards the lower end of this spectrum, indicating a potential concern in asset efficiency for the year.