Last update on 2024-06-05

LyondellBasell Industries (LYB) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

LyondellBasell Industries (LYB) Piotroski F-Score Analysis for 2023 showing a final score of 6/9. An in-depth financial performance review including profitability and liquidity.

Short Analysis - Piotroski Score: 6

We're running LyondellBasell Industries (LYB) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a rating between 0 and 9 that evaluates a company's financial health based on profitability, liquidity, and leverage. LyondellBasell Industries (LYB) scores a 6 out of 9. The company shows positive net income and cash flow, and its operating cash flow is significantly higher than its net income, indicating strong financial health. The company has also reduced its leverage and increased its current ratio, showcasing improved liquidity. LYB has not diluted its shares, suggesting confidence in its value. However, the Return on Assets has decreased, and both the Gross Margin and Asset Turnover Ratio have dropped, indicating a decline in efficiency.

Insights for Value Investors Seeking Stable Income

LyondellBasell Industries (LYB) scores a fairly strong 6 on the Piotroski F-Score, indicating overall good financial health with room for improvement in efficiency. It might be a good investment, especially because it generates positive cash flow, has improved liquidity, and hasn't diluted shares. However, be cautious about its declining efficiency in asset utilization and profitability. If you're considering investing, it might be worth keeping an eye on how LYB addresses these issues moving forward.

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

Profitability of LyondellBasell Industries (LYB)

Company has a positive net income?

Net income, or net profit, is an important indicator of a company's profitability and financial health. Positive net income is a sign of profitability.

For LyondellBasell Industries (LYB), the net income in 2023 was positive at $2.114 billion. Over the past 20 years, this figure has shown considerable fluctuations, with significant losses, particularly during 2008 and 2009, and periods of high profitability. The most recent positive net income value suggests a trend of profitability, which is crucial for shareholder value. Thus, under the Piotroski Analysis criteria for net income, LYB scores 1 point as it achieved positive net income in 2023.

Company has a positive cash flow?

The criterion assesses whether the company generates positive operating cash flow (CFO), which indicates its ability to generate sufficient revenue to cover operating expenses.

For LyondellBasell Industries (LYB), the CFO for 2023 is $4,942,000,000, which is positive. The trend over the last 20 years shows consistent positive cash flow from operations, except for 2009, where it was negative at -$787,000,000. In general, LYB's ability to generate positive CFO is a strong indicator of its financial health and operational efficiency. Therefore, LYB earns 1 point for this criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) is a critical parameter in the Piotroski Analysis as it indicates how efficiently a company is using its assets to generate profits. An improving ROA shows better asset utilization, while a declining ROA suggests inefficiencies.

In 2023, LyondellBasell Industries (LYB) reported an ROA of 0.0576, a significant decrease from the 0.1062 ROA in 2022. This substantial decline from the previous year is concerning as it indicates diminished efficiency in utilizing assets to generate earnings. Analyzing historical data, LYB's ROA in previous years had generally trended around higher values. While operating cash flow remains robust, the steep drop in ROA is noticeable in a broader industry comparison, given that the industry's median ROA ranged from 0.3018 to 0. 3189 . Hence, for 2023, LYB scores a 0 on the ROA increase criterion.

Operating Cashflow are higher than Netincome?

This criterium checks if the operating cash flow is higher than the net income. It ensures that the company's profits are backed by actual cash flows.

In 2023, LyondellBasell Industries has an operating cash flow of $4.94 billion and a net income of $2.11 billion. Since the operating cash flow is significantly higher than the net income, we award the company 1 point. This suggests that LYB’s profits are strongly supported by cash flows, adding to the company's financial robustness. Over the last 20 years, LYB has consistently posted positive operating cash flows, apart from 2009, where the figure was negative. This shows a trend of healthy cash generation capabilities.

Liquidity of LyondellBasell Industries (LYB)

Leverage is declining?

Change in leverage assesses a company's financial risk by comparing debt levels to shareholder equity. Lower leverage indicates reduced financial risk.

Comparing the leverage of 0.3314 in 2022 to 0.3174 in 2023, we observe a decrease. This suggests that LyondellBasell Industries (LYB) has reduced its financial risk by lowering its debt levels relative to equity. Historically, leverage peaked at 0.4663 in 2020 and has been on a declining trend, which further reinforces the positive direction in risk management. Therefore, this decrease in leverage adds 1 point to the Piotroski score.

Current Ratio is growing?

The change in current ratio indicates the company's ability to meet its short-term liabilities with its short-term assets. It is a measure of liquidity and financial health.

The current ratio for LyondellBasell Industries (LYB) increased from 1.7522 in 2022 to 1.8394 in 2023, representing a positive change and suggesting an improvement in the company's short-term liquidity. Over the last 20 years, LYB's current ratio has shown significant fluctuation, reaching as high as 2.8972 in 2010 and dropping to 0.2601 in 2008. Compared to the industry median's current ratios, which ranged from 1.6083 in 2007 to 2.0265 in 2020, LYB's current ratio for both 2022 and 2023 falls below the industry median for each respective year. Despite this, the increase in 2023 is favorable, adding 1 point under the Piotroski Analysis.

Number of shares not diluted?

This criterion reflects whether the company is engaging in share buybacks or issuing more shares. A decrease in shares usually signals management's confidence.

In 2023, LyondellBasell Industries (LYB) witnessed a decrease in outstanding shares to 325,000,000 from 327,000,000 in 2022. This reduction suggests that the company has been executing share buybacks, which often indicates a management belief that the company's shares are undervalued or a commitment to returning value to shareholders. Historically, LYB has shown a consistent decline in outstanding shares since 2012, dropping from 577,000,000 shares to the present figure. This enduring trend strengthens the indication of robust shareholder-aligned policies. Therefore, for this criterion, LYB scores 1 point.

Operating of LyondellBasell Industries (LYB)

Cross Margin is growing?

Gross Margin evaluates the efficiency of a company in producing goods relative to its revenue. It is a critical indicator of financial health.

LyondellBasell Industries (LYB) experienced a slight decrease in its Gross Margin from 0.1309 in 2022 to 0.1279 in 2023. This reduction signifies a decline in the company's profitability and efficiency in producing goods relative to its revenue. Over the past 20 years, the Gross Margin has shown significant fluctuations, reaching a peak of 0.2154 in 2015. Comparing LYB’s trend with the industry median, LYB consistently underperforms against industry averages, with the industry's median remaining relatively stable around 0.3000. Despite the historical volatility, the Gross Margin decrease in 2023 is slightly negative for LYB, resulting in a score of 0 for this criterion.

Asset Turnover Ratio is growing?

Change in Asset Turnover assesses a company's efficiency at using its assets to generate sales, crucial for understanding operational performance.

In 2023, LyondellBasell Industries (LYB) exhibited an Asset Turnover of 1.1206, which represents a decline from the Asset Turnover of 1.3802 in 2022. Thus, the Asset Turnover decreased rather than increased, earning a score of 0. From this perspective, LYB has demonstrated a reduction in its efficacy in leveraging assets to drive revenue. Historically, the highest Asset Turnover in the last 20 years was 3.5396 in 2008, marking a significant fluctuation over the years. The recent figures indicate that LYB needs to focus on improving its efficiency in this regard.