Last update on 2024-06-05

Mid-America Apartment Communities (MAA) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Explore the 2023 Piotroski F-Score Analysis of Mid-America Apartment Communities (MAA) with a score of 6/9, evaluating their profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 6

We're running Mid-America Apartment Communities (MAA) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Mid-America Apartment Communities (MAA) achieved a Piotroski F-Score of 6 out of 9, indicating a moderately strong financial position. The criteria used to assess this score include profitability, liquidity, and operational efficiency. 1. **Profitability**: MAA reported a positive net income of $552.8 million for 2023 and a positive cash flow from operations of $1.137 billion, which earned them points. However, their Return on Assets (ROA) decreased from 2022 to 2023, losing a point on this criterion but still demonstrating an ability to grow profits over the long term. 2. **Liquidity**: MAA’s leverage has slightly decreased, adding a point. However, their current ratio declined and remains below the industry median, losing a point. Furthermore, their number of shares outstanding increased, leading to another lost point. 3. **Operational Efficiency**: MAA's gross margin improved from 0.3729 in 2022 to 0.3795 in 2023, and their asset turnover ratio also showed improvement, both of which contribute positively to their score.

Insights for Value Investors Seeking Stable Income

Despite scoring 6 out of 9 on the Piotroski F-Score, Mid-America Apartment Communities (MAA) shows a mix of strengths and concerns. The company is profitable and has grown its cash flow and gross margin. However, the decrease in ROA and the low current ratio are areas of concern. While the increase in shares outstanding could be a step for future growth, it may lead to dilution of value for existing shareholders. As an investor, it would be worth exploring MAA further due to its consistent cash flow and profitability. However, it is equally important to evaluate their strategies for improving liquidity and managing shareholder value. Carefully consider the potential risks before making a final investment decision.

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

Profitability of Mid-America Apartment Communities (MAA)

Company has a positive net income?

Net income measures the profitability of a company over a specific period. A positive net income indicates that the company is generating profit, which is crucial for long-term sustainability and growth.

For the fiscal year 2023, Mid-America Apartment Communities (MAA) reported a net income of $552,806,000. This positive net income reflects the company's ability to generate profits effectively. Adding historical context, the net income trend over the last 20 years shows a consistent upward trajectory with minor fluctuations, underscoring strong financial health. Notably, MAA's net income grew from $20,206,000 in 2003 to $552,806,000 in 2023. This indicates robust profitability and efficient operations. Hence, in the Piotroski Score framework, MAA earns 1 point for this criterion.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) reflects the cash that a company generates from its regular operating activities.

For the year 2023, Mid-America Apartment Communities (MAA) reported a CFO of $1,137,187,000, which is positive. This strong positive CFO is indicative of robust operational performance, likely driven by increasing rental income given its largest residential REIT stance. Over the past 20 years, MAA's operating cash flow has shown impressive growth from $79,241,000 in 2003 to the current level. This consistently positive and growing CFO trend illustrates the company's effective capacity to generate cash from its operations, add resiliency to its business model, and improve shareholder value. A point is added for this criterion in the Piotroski score.

Return on Assets (ROA) are growing?

ROA stands for Return on Assets and measures how effectively a company utilizes its assets to generate profit compared to the previous year. It is an important indicator of management's efficiency.

The ROA of Mid-America Apartment Communities (MAA) declined from 0.0566 in 2022 to 0.0487 in 2023. This downward trend indicates a decrease in the efficiency with which MAA is utilizing its assets to generate profits, which can be concerning for investors. When contrasted with the sector's median ROA that hovered consistently above 0.4 over the last two decades, MAA's performance in 2023 appears notably restrained. In addition, considering MAA's past operating cash flows demonstrate general upward momentum, this ROA drop in 2023 warrants further scrutiny into operational challenges. Consequently, MAA scores 0 points under this criterion as its ROA decreased.

Operating Cashflow are higher than Netincome?

Explain the criterion for Mid-America Apartment Communities (MAA) and why it is important to consider

The ability of a company to generate cash from its operations is essential. When operating cash flow is higher than net income, it suggests high-quality earnings and indicates that the company is not relying on accounting adjustments to report profits. Adding up the numbers, MAA reported an impressive Operating Cash Flow of $1,137,187,000 compared to a Net Income of $552,806,000 in 2023. This gives MAA 1 point according to our criteria, showcasing strong fundamental performance.

Liquidity of Mid-America Apartment Communities (MAA)

Leverage is declining?

Change in Leverage examines how a company's leverage has shifted over a specified period and assesses its control over its financial obligations.

Comparing Mid-America Apartment Communities' leverage ratios, there was a slight increase from 0.3935 in 2022 to 0.3546 in 2023. Meaning that leverage in MAA decreased. Including a 1 in Leverage will Increase the trust from new investors and certainly give a Achilles Heel for attracting from next engagement parties as well.

Current Ratio is growing?

The current ratio is a key liquidity metric that measures a company's ability to cover its short-term liabilities with its short-term assets. For MAA, an increase or decrease in the ratio signifies changes in liquidity and operational efficiency.

Mid-America Apartment Communities (MAA) saw a decrease in its current ratio from 0.1094 in 2022 to 0.0519 in 2023. This indicates a diminishing ability to meet short-term obligations, which is concerning. Notably, MAA's current ratio has been consistently below the industry median for the past two decades, signaling persistent liquidity constraints. Historically, the highest ratio in the last 20 years was 23.0207 in 2005, while the industry median peaked at 1.4457 in 2012. The continued below-par performance raises red flags for creditors and investors regarding MAA's short-term financial health.

Number of shares not diluted?

The criterion for change in shares outstanding assesses whether a company has issued more shares over time. A decrease in outstanding shares might indicate share buybacks, which can be beneficial by increasing the value of remaining shares.

The outstanding shares for Mid-America Apartment Communities (MAA) increased from 115,344,000 in 2022 to 116,521,000 in 2023. This represents an increase of 1,177,000 shares or approximately 1.02%. Therefore, under the Piotroski analysis, a score of 0 is assigned, as a decrease was not observed. Historically, MAA's shares have steadily increased over the last 20 years, showing significant jumps in various years, notably from 2016 to 2017, where the number of shares increased by approximately 35 million. This trend of dilution could indicate that the company is raising capital, potentially for further investment or growth, which is a common practice in REITs. However, persistent dilution without proportional profit increase can dilute the value for existing shareholders.

Operating of Mid-America Apartment Communities (MAA)

Cross Margin is growing?

One key criterion in Piotroski Analyses is the change in gross margin, indicating profitability and cost management efficiency.

The Gross Margin for Mid-America Apartment Communities (MAA) for the year 2023 is 0.3795, compared to 0.3729 in 2022. This marks an increase in Gross Margin, suggesting improved profitability and cost control, adding 1 point to the Piotroski score. Historically, the Gross Margin has shown variability, with a significant increase in recent years from 0.2687 in 2003 to the current value. Moreover, when compared to the industry median, MAA has underperformed, as the industry median Gross Margin in 2023 stands notably higher at 0.5894. Nonetheless, the year-over-year improvement for MAA is a positive indicator in the Piotroski analysis.

Asset Turnover Ratio is growing?

The asset turnover ratio is a measure of a company's efficiency in generating revenue from its assets. It's calculated by dividing sales revenue by total assets. Higher asset turnover indicates effective utilization of assets in revenue generation, important for evaluating operational efficiency.

In 2023, Mid-America Apartment Communities (MAA) recorded an asset turnover of 0.1891, up from 0.1793 in 2022. This indicates an increase in efficiency in utilizing its assets to generate revenue. Historically, the asset turnover ratios fluctuated mildly over the last 20 years, peaking at 0.1999 in 2007, and dipping significantly to 0.122 in 2016. The gradual recovery and increase up to 2023 is a positive trend, showing MAA’s improving efficiency. Thus, this increased trend in asset turnover contributes positively to the Piotroski score, adding 1 point to the overall score.