Last update on 2024-06-06

Lumen Technologies (LUMN) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Lumen Technologies (LUMN) Piotroski F-Score Analysis for 2023 reveals a final score of 5/9, indicating mixed financial health with specific areas of concern and strengths.

Short Analysis - Piotroski Score: 5

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

Lumen Technologies (LUMN) has been analyzed using the Piotroski F-Score, which assesses financial health based on nine criteria. Lumen Technologies scored 5 out of 9 points. Key findings include negative net income in 2023, though the company has a positive cash flow from operations. The Return on Assets (ROA) showed a significant decline, and the Gross Margin dropped, indicating potential operational challenges. On the positive side, the Operating Cash Flow is higher than net income, the Current Ratio is growing, and the number of outstanding shares has decreased. However, leverage has increased, signaling a higher financial risk.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, Lumen Technologies' score of 5 suggests a moderate financial position. The positive cash flow and improvements in current ratio and asset turnover are good signs. However, the negative net income, declining ROA, and increasing leverage indicate potential risks. This stock could be worth considering for investment, but given the mixed signals, cautious investors should proceed with thorough research focusing on mitigating risks associated with financial instability and operational inefficiencies.

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

Profitability of Lumen Technologies (LUMN)

Company has a positive net income?

The net income criterion assesses if the company is generating profit, a fundamental aspect in evaluating its financial health.

Lumen Technologies' net income for 2023 stands at -$10,298,000,000, which is significantly negative. Looking at historical data: Lumen has had fluctuating net income over the years with several instances of negative net income, such as in 2007, 2018, 2019, 2010, and most starkly in 2023. This trend highlights periods of financial difficulty contrasting strongly with more profitable years, such as 2015 when they posted $1,389,000,000 in net income. Given the significant loss in 2023, Lumen Technologies earns 0 points for this criterion.

Company has a positive cash flow?

measure of whether a company is generating sufficient cash from its normal business operations

Lumen Technologies has reported a cash flow from operations (CFO) of $2.16 billion for the fiscal year 2023. This figure is positive, which provides a robust indicator that the firm is generating ample cash from its core business operations. According to the historical data spanning the last 20 years, the company's CFO has experienced fluctuations but has generally remained positive. Notably, Lumen even achieved a CFO as high as $7.03 billion in 2018. Despite the decline in operating cash flow over the past few years, the positive CFO for 2023 remains a favorable signal. This trend is crucial for Lumen Technologies as it ensures the company can cover its operational expenses, invest in growth opportunities, and meet its financial obligations without resorting to external financing. Therefore, for this Piotroski criterion, Lumen Technologies earns 1 point.

Return on Assets (ROA) are growing?

Return on Assets (ROA) is a metric indicating the profitability of a company relative to its total assets. It's crucial because it highlights the efficiency with which a company utilizes its assets to generate earnings.

In the context of Lumen Technologies (LUMN), the ROA for 2023 is -0.2586, compared to -0.0299 in 2022. This is a considerable decline, demonstrating an exacerbation in profitability issues. Over the past 20 years, the market sees a range of ROA values, with the industry median consistently positive, exemplifying healthier performance standards. For instance, in 2023, the industry median ROA stood at 0.6122, showcasing a stark contrast to Lumen's negative ROA figures. This performance deviation underscores operational inefficiencies or potential structural challenges within Lumen. Consequently, no point is added for this criterion, signaling a negative trend.

Operating Cashflow are higher than Netincome?

Compare Operating Cash Flow and Net Income and assign points

For 2023, Lumen Technologies (LUMN) showcases an Operating Cash Flow of $2,160 million compared to a Net Income of -$10,298 million. This significant difference, where operating cash flow is substantially higher than net income, would add 1 point according to the Piotroski F-Score criteria for operating efficiency. Historically, Lumen's operating cash flow has been generally robust, often surpassing its net income. This trend indicates a recurrent ability to generate cash from operations despite occasional negative net income figures. This consistency in cash flow signals strong internal financing capability and business operational health, even during tumultuous periods.

Liquidity of Lumen Technologies (LUMN)

Leverage is declining?

Change in Leverage determines the trend in how much debt the company is using to finance its assets. It is crucial as rising leverage indicates increasing financial risk.

For Lumen Technologies, the leverage has increased from 0.4476 in 2022 to 0.583 in 2023. This increase is unfavorable for the Piotroski Score as it implies that the company's financial risk has risen. Historically, Lumen Technologies has seen steady leverage levels from 2003 to 2022, staying below the 0.504 mark with a slight peak in 2018 at 0.504. The jump to 0.583 in 2023 represents an elevated risk scenario, deviating sharply above previous trends. Therefore, this criterion scores 0 points.

Current Ratio is growing?

Current Ratio compares a company’s current assets to its current liabilities, reflecting its ability to pay off short-term obligations.

Lumen Technologies' Current Ratio has increased from 1.1131 in 2022 to 1.3512 in 2023, which signals a 21.4% improvement. This suggests the company has enhanced its liquidity position and is now better equipped to meet its short-term liabilities. Over the last 20 years, the trend in the company’s Current Ratio has been inconsistent, but the recent increase is a positive sign. Although the Current Ratio of 1.3512 is higher than the Industry Median of 0.9574 in 2023, indicating a healthier short-term financial position, it is imperative to consider historical fluctuations. For instance, in 2020, the ratio was even higher at 1.6092 before falling in 2021. Hence, Lumen Technologies' latest Current Ratio deserves a point, highlighting an encouraging trend. However, one should be cautious due to its historical volatility and ensure this upward trend is sustainable.

Number of shares not diluted?

Change in Shares Outstanding: Compare the Outstanding Shares of 1007517000 in 2022 with the Outstanding Shares of 983081000 in 2023 and check if Outstanding Shares increased or decreased. If the Outstanding Shares decreased in 2023 add 1 point if not set it to 0.

The Outstanding Shares for Lumen Technologies have decreased from 1,007,517,000 in 2022 to 983,081,000 in 2023. This represents a reduction in shares outstanding, meaning the total number of shares has decreased by 2.4%. Hence, according to the Piotroski Analysis criterion for change in shares outstanding, a point would be added for this decrease, signaling a potential positive sign for investors. Historically, the company has shown various trends in its outstanding shares, with notable peaks in 2018 and continuous reduction since 2021.

Operating of Lumen Technologies (LUMN)

Cross Margin is growing?

Assessing the year-over-year change in a company's Gross Margin is crucial as it indicates changes in production efficiency, operating costs management, and overall profitability. An increasing Gross Margin suggests better control over production and operating costs relative to revenues.

The Gross Margin for Lumen Technologies in 2023 is 0.5092, which has decreased from 0.5498 in 2022. This decrease indicates potential challenges in managing production and operating costs or revenue generation. This results in a score of 0 for this criterion, signaling a deterioration in production efficiency or increased operational challenges. Moreover, the industry median Gross Margin in 2023 is 0.6122, significantly higher than that of Lumen Technologies, underscoring competitive pressures and relative inefficiency.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. It is a key indicator of operational efficiency.

In 2023, Lumen Technologies reported an Asset Turnover ratio of 0.3656 compared to 0.3374 in 2022, indicating a notable improvement. This increase adds a point to the Piotroski score. Historically, observing the past 20 years, the ratio peaked at 0.3927 in 2011. The recent increment aligns with the company’s higher performance and better asset utilization efficiency. Thus, this trend is positive for assessing operational efficiency.