Last update on 2024-06-07

Lanxess (LXS.DE) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Analyse the Piotroski F-Score of Lanxess (LXS.DE) for 2023, scoring 6/9 based on profitability, liquidity, and efficiency criteria.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score is used to measure a company's financial strength on a scale of 0 to 9. It's based on 9 criteria including profitability, liquidity, and efficiency. Lanxess (LXS.DE) has a Piotroski Score of 6. It meets most profit, liquidity, and cash flow criteria but falls short in leverage, share dilution, gross margin, and asset turnover.

Insights for Value Investors Seeking Stable Income

Lanxess shows strength in profitability, cash flow, and short-term financial health, making it a decent investment. However, the decline in leverage, gross margin, and asset turnover are red flags. Interested investors should proceed cautiously, making sure to investigate the reasons behind these weaknesses before making a decision.

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

Profitability of Lanxess (LXS.DE)

Company has a positive net income?

The Net Income criterion checks if the company is generating profit. Positive net income suggests the company is profitable and financially healthy.

Lanxess reported a net income of €443 million in 2023, which is positive. This is a strong indicator of financial health. Over the past 20 years, the company has had fluctuating net incomes, including significant losses early on, like -€996 million in 2003 and -€159 million in 2013. However, in recent years they have consistently reported positive net incomes, which shows a positive trend. This positive net income adds one point for Lanxess in the Piotroski Analysis.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash produced by the company's core business operations. It's vital to evaluate this as it indicates the company's ability to generate sufficient cash to maintain and grow operations without relying on external funding.

For the fiscal year 2023, Lanxess reported a positive CFO of €838 million, thereby earning a score of 1 point according to the Piotroski F-Score methodology. This positive cash flow underscores the company’s robust ability to generate cash flows from its operational activities. Historically, this metric has varied; for instance, in 2012, it was also €838 million, showing remarkable consistency over the years. However, fluctuations were observed, with a low point of €159 million in 2022, suggesting varying operational efficiencies or external market factors impacting the operations. Overall, the positive trend for 2023 is a strong indicator of operational health.

Return on Assets (ROA) are growing?

Change in ROA measures if the company's return on assets improved year over year. It indicates operational efficiency.

For Lanxess (LXS.DE), the ROA increased from 0.0229 in 2022 to 0.0423 in 2023. This represents a significant improvement in asset utilization efficiency. The increase in ROA by approximately 84.7% compared to the previous year shows that the company is generating higher returns on its assets, a positive trend for stakeholders. Over the last 20 years, the company's improving ROA in 2023 distinguishes itself even more when compared to the industry median ROA trend, which slightly declined from 0.3089 in 2022 to 0.3018 in 2023, showcasing Lanxess' operational improvement against its peers.

Operating Cashflow are higher than Netincome?

The criterion examines if a company generates more cash from its operations than it earns through net income. It indicates effective cash flow management.

For the fiscal year 2023, Lanxess (LXS.DE) generated an operating cash flow of €838 million, compared to a net income of €443 million. This meets the criterion of having a higher operating cash flow than net income. High operating cash flow relative to net income is a positive indicator, as it suggests the company is efficient in converting its revenue into actual cash, showing a strong cash management capability. Assigning a score of 1 for this criterion.

Liquidity of Lanxess (LXS.DE)

Leverage is declining?

Leverage refers to the amount of debt used to finance a company's assets. The criterion evaluates whether a company's leverage has decreased from the prior year, indicating a healthier balance sheet and potentially lower financial risk.

For Lanxess (LXS.DE), the leverage ratio in 2022 stood at 0.3026 compared to 0.3039 in 2023. This indicates a slight increase in leverage, which means the company has taken on more debt relative to its equity. Over the last 20 years, Lanxess's leverage has shown variability, with a notable peak at 0.3194 in 2019 and a low of 0.1672 in 2015. The slight increase in 2023 suggests a possible rise in financial risk as the firm may rely more on debt. Therefore, this criterion assigns a score of 0 to Lanxess for 2023.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with its current assets. It is important because it shows the company's short-term financial health and liquidity.

In 2023, Lanxess has a Current Ratio of 2.4779, up from 1.9992 in 2022. This increase is a positive sign, indicating improved liquidity and a better ability to cover short-term liabilities. Historically, Lanxess' Current Ratio has fluctuated, with the lowest value at 1.1988 and the highest at 3.2811 over the past 20 years. Comparatively, the industry median ratio in 2023 stands at 1.9399, which Lanxess surpasses. This upward trend, resulting in a score of 1, suggests that Lanxess is in a healthy financial position relative to its industry peers.

Number of shares not diluted?

The Change in Shares Outstanding criterion assesses whether the company has diluted its shares. Dilution can negatively impact existing shareholders by reducing their ownership proportion.

The Outstanding Shares of Lanxess remained constant from 2022 to 2023, at 86,346,303 shares. Given that the shares did not decrease, we do not add any points for this criterion. Over the last 20 years, Lanxess' outstanding shares have shown some volatility. Notable increases occurred in 2014 and 2015, reaching a peak of 91,522,936 shares in 2015, likely reflecting events such as equity raises or conversions of convertible securities. The recent stability in 2022 and 2023 indicates that the company has not undertaken any actions that would further dilute its existing shares. However, the lack of a decrease fails to meet the Piotroski requirement for this point.

Operating of Lanxess (LXS.DE)

Cross Margin is growing?

A crucial indicator of financial health that assesses profitability before accounting and administrative costs, aiding in benchmarking against industry peers.

The Gross Margin of Lanxess (LXS.DE) has decreased from 0.2395 in 2022 to 0.1889 in 2023. This trend reflects a reduction in efficiency or an increase in production costs, potentially highlighting operational issues or competitive pressures. Over the past 20 years, Lanxess's Gross Margin has shown more volatility compared to the industry median, which has generally been higher and more stable. The industry median in 2023 was 0.3018, significantly surpassing Lanxess's performance. Therefore, this criterion earns 0 points as the Gross Margin has not increased, indicating a negative trend.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. An increasing ratio suggests better efficiency.

In 2023, Lanxess (LXS.DE) reported an Asset Turnover ratio of 0.6409, a decline from 0.7415 in 2022. This decrease signals a reduced efficiency in using its assets to generate revenue. Historically, the ratio has seen a downward trend from its peak values in the mid-2000s, further indicating long-term challenges in asset utilization.