Last update on 2024-06-07

LSI Industries (LYTS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Analyze the Piotroski F-Score of LSI Industries (LYTS) for 2023, receiving a strong score of 7/9 based on profitability, liquidity, and efficiency metrics.

Short Analysis - Piotroski Score: 7

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

The Piotroski F-Score is a measure of a company's financial strength, scored between 0 to 9 by evaluating profitability, liquidity, and leverage. LSI Industries (LYTS) features a positive net income of $25,762,000 and a strong cash flow from operations of $49,588,000 in 2023, showing solid profitability and cash flow management. The company's ROA improved to 0.0849 in 2023, and its operating cash flow exceeds its net income, suggesting efficient asset usage and strong cash flow backing earnings. LYTS also reduced its leverage from 0.267 to 0.1301, indicating better financial stability. However, the current ratio decreased slightly, and the number of shares outstanding increased, signaling potential dilution concerns. The gross margin increased to 27.56%, outperforming the industry median, and the asset turnover ratio grew, reflecting improved operational efficiency.

Insights for Value Investors Seeking Stable Income

With a Piotroski Score of 7, LSI Industries shows strong financial health, indicating that it may be an undervalued investment. The firm has exhibited solid profitability, reduced leverage, and efficiency in asset utilization and cash flow management. However, potential investors should consider the increasing number of shares outstanding, which may dilute value. Overall, LSI Industries appears to be a strong investment prospect worth considering further.

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

Profitability of LSI Industries (LYTS)

Company has a positive net income?

This criterion checks if the company's net income for the year is positive or negative. A positive net income contributes positively to the Piotroski Score, indicating profitability.

For LSI Industries (LYTS), the net income in 2023 is reported at $25,762,000, which is indeed positive. This bolsters the Piotroski Score by adding 1 point for profitability. Observing the historical data, LSI Industries' net income has fluctuated significantly over the past 20 years, with notable losses in 2003, 2008, 2009, 2015, and 2016. However, since 2017, there seems to be a general trend of profitability recovery, showing sustained positive net income in the last four consecutive years (2019-2023). This trend suggests a positive turnaround in the company's operating performance, enhancing confidence in its current financial health.

Company has a positive cash flow?

A positive Cash Flow from Operations (CFO) indicates that a company is generating sufficient revenue to cover its operational expenses, which is vital for its financial health.

LSI Industries (LYTS) shows a positive Cash Flow from Operations (CFO) amounting to $49,588,000 in 2023. This is a notable trend, especially considering the volatile CFO history over the past 20 years, including periods of negative cash flow, such as the -$3,806,000 in 2011 and -$3,863,000 in 2022. The strong positive CFO for 2023 indicates improved operational efficiency and financial stability. Therefore, LYTS earns a full point for this criterion.

Return on Assets (ROA) are growing?

This criterion assesses the company's return on assets (ROA) to determine if it has improved over the past year. An increase indicates better utilization of assets to generate earnings.

In 2023, LSI Industries exhibited an ROA of 0.0849 compared to 0.0503 in 2022. This upward trend results in the addition of 1 point. The rise in ROA is an encouraging sign, reflecting improved efficiency. Despite being lower than the industry median ROA of 0.2104 for 2023, it indicates progress. Historical data reveals fluctuating trends, peaking at 0.2104 in 2015 and dipping to -0.0386 in 2022. However, the recent improvement bodes well for their ability to utilize assets effectively, amid industry variations.

Operating Cashflow are higher than Netincome?

To determine if the Operating Cash Flow is higher than Net Income. This criterion assesses the quality of earnings. A high operating cash flow compared to net income indicates that earnings are backed by cash flow, enhancing the reliability of reported earnings.

In 2023, LSI Industries (LYTS) reported an Operating Cash Flow of $49,588,000 and a Net Income of $25,762,000. Since the operating cash flow exceeds net income, one point is awarded for this criterion. This indicates positive cash flow management and suggests that earnings are backed by substantial cash flow, enhancing their reliability. Additionally, reviewing the cash flow from operations over the last 20 years reveals significant fluctuations, with notable improvements in 2023. The operating cash flow in 2023 ($49,588,000) marked a substantial increase compared to $(3,863,000) in 2022, highlighting a significant positive shift. Compared to a 20-year low of $-3,806,000 in 2011, the latest figure represents a significant recovery. Alongside, the last 20 years of data also shows the highest operating cash flow value since 2003, correlating with continuous efforts in improving operational efficiencies. Regarding the net income trend, while historical net income figures have experienced several periods of losses, recent trends illustrate a positive trajectory with $25,762,000 in 2023 as the highest net income observed over two decades. This rebound in net income, supported by substantial operating cash flow, underscores a robust financial turnaround for LSI Industries incumbent with more reliable future earnings reports.

Liquidity of LSI Industries (LYTS)

Leverage is declining?

Change in Leverage: Compare the Leverage of 0.267 in 2022 with the Leverage of 0.1301 in 2023 and check if Leverage increased or decreased.

The Leverage of LSI Industries (LYTS) in 2022 was 0.267, which decreased to 0.1301 in 2023. Leverage measures a company's debt level relative to its equity. Here, we observe a decrease in leverage, implying that LSI Industries has reduced its debt burden relative to its equity. This is a positive trend as it indicates improved financial stability and potentially lower financial risk. Given the Piotroski score criteria, we assign 1 point for this decrease in leverage in 2023. Historically, we see that LSI Industries' leverage has often fluctuated, evident from 2003 to 2023, with visible spikes in 2017 and 2022 and periods of no leverage. Thus, the recent reduction is a notable improvement.

Current Ratio is growing?

The current ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets.

Comparing the current ratio of 1.9576 in 2023 with 2.0617 in 2022 reveals a decrease. Therefore, the point is set to 0. Examining the historical data, LSI Industries has had fluctuating but generally higher current ratios, with a high of 4.9175 in 2011 and a dip to 1.7633 in 2021. The industry's median has been more stable, generally ranging between 2 to 3. Notably, LSI Industries' current ratio of 1.9576 in 2023 remains lower than the industry's median of 2.0742. This decrease in the current ratio may indicate deteriorating liquidity for LSI Industries, but since it's just below the industry median, this trend is a mild concern but not alarming.

Number of shares not diluted?

This criterion assesses whether a company's shares outstanding have decreased. A decrease typically indicates share buyback, which could be a sign of managerial confidence and good financial health.

The outstanding shares of LSI Industries increased from 27,286,000 in 2022 to 28,127,000 in 2023. This represents an increase of 841,000 shares. Historically, LSI Industries has shown a pattern of consistently increasing its shares outstanding over the past 20 years, rising from approximately 20 million shares in 2003 to over 28 million in 2023. This increase results in a score of 0 in this criterion for the Piotroski analysis, indicating no improvement in financial health based on shares outstanding. The continuous rise may raise questions about dilution and warrants a closer scrutiny into the company's financial strategies.

Operating of LSI Industries (LYTS)

Cross Margin is growing?

The change in gross margin measures the difference in gross margin percentage points from one year to the next. LSI Industries had a gross margin of 27.56% in 2023 compared to 24% in 2022.

For LSI Industries (LYTS), the gross margin increased significantly from 24% in 2022 to 27.56% in 2023. This 3.56 percentage point increase indicates improvements in cost efficiency and pricing strategies. Historically, LYTS has fluctuated between 21.51% and 26.59% over the past 20 years, and the recent jump places it above its average long-term performance. Comparatively, the industry median gross margin in 2023 slightly decreased to 21.04% from 21.87% in 2022. Thus, LSI Industries not only improved its own gross margin but also outperformed the industry median, signaling a competitive advantage. Considering this, LYTS earns 1 point according to the Piotroski criterion.

Asset Turnover Ratio is growing?

Asset Turnover measures a firm’s efficiency in using its assets to generate sales. A higher ratio indicates better performance.

Comparing LSI Industries' (LYTS) Asset Turnover ratios of 1.6369 in 2023 and 1.5224 in 2022, we observe an increase, which means improved efficiency. Historically, LYTS has shown fluctuations, such as peaks in 2014 (1.7664) and 2005 (1.6262). Overall, the increase to 1.6369 in 2023, above the 20-year average, reflects positively on the company’s performance, earning it 1 point in the Piotroski Score.