Last update on 2024-06-06

Meta Platforms (META) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Meta Platforms (META) scored 7/9 on the Piotroski F-Score for 2023, highlighting its financial strength. Learn more in this detailed analysis.

Short Analysis - Piotroski Score: 7

We're running Meta Platforms (META) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

The Piotroski F-Score is a number between 0 to 9 reflecting a company's financial position based on 9 criteria involving profitability, liquidity, and leverage. For Meta Platforms (META), the analysis yields a Piotroski Score of 7. Key highlights include positive and growing net income, cash flow, and return on assets (ROA), with operating cash flow higher than net income indicating strong operational efficiency. Despite a slight increase in leverage and a dip in the asset turnover ratio, other indicators such as current ratio, number of shares outstanding, and gross margin show positive trends. The overall score suggests a robust financial position with favorable profitability, liquidity, and operational indicators.

Insights for Value Investors Seeking Stable Income

Given the Piotroski Score of 7 out of 9, Meta Platforms (META) appears to have a strong financial position. The positive trends in profitability, liquidity, and operational efficiency make it an appealing candidate for investment. Despite a minor increase in leverage and a reduced asset turnover ratio, the company's ability to maintain high cash flow, income, and gross margin indicate it is undervalued and potentially profitable. It is advisable for investors to consider Meta Platforms as a viable option for their portfolio.

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

Profitability of Meta Platforms (META)

Company has a positive net income?

Net income examines a company's profitability, revealing how much profit has been made after expenses. It's crucial for assessing financial health.

For Meta Platforms (META), the net income reported in 2023 stands at $39.098 billion. This is indeed a positive figure, contributing 1 point to the Piotroski Score. Historical data show dynamic performance: META saw early modest earnings in 2010 at $606 million, spiking in subsequent years. By 2016, net income surpassed $10 billion and continued an upward trend, peaking in 2021 at $39.37 billion. Even with some fluctuations, the restorative trend in 2023 at $39.098 billion underlines robust profitability, which is favorable for PI assessment.

Company has a positive cash flow?

Evaluating Cash Flow from Operations (CFO) is fundamental in analyzing a company's financial health and sustainability.

Meta Platforms (META) has reported a Cash Flow from Operations (CFO) of $71.11 billion in 2023, which is positive. This is a significant increase from $50.48 billion in 2022. Considering CFO has been consistently growing, especially from $698 million in 2010 to $71.11 billion in 2023, this portrays a robust upward trend. The positive and upward trending CFO is extremely favorable and adds 1 point to the Piotroski score. This indicates a strong ability to generate cash through its core business operations, which is crucial for stability and growth.

Return on Assets (ROA) are growing?

The criterion here compares the Return on Assets (ROA) of one year with the previous year to determine if there has been an improvement. ROA measures a company's profitability relative to its total assets and is a crucial indicator of financial health.

Meta Platforms (META) saw its ROA increase from 0.1319 in 2022 to 0.1883 in 2023, indicating better asset utilization for generating income. This upward trend is a positive sign and merits 1 point as per Piotroski's F-Score system. Over the last 20 years, META's ROA shows resilience and growth, often surpassing the industry median. This ability to continuously improve asset efficiency indicates strong operational management, contributing favorably to investor sentiment.

Operating Cashflow are higher than Netincome?

Compare Operating Cash Flow to Net Income: If the operating cash flow is higher than net income, it indicates strong profit quality and cash conversion efficiency.

For Meta Platforms (META) in 2023, the operating cash flow (OCF) stands at $71.11 billion whereas the net income (NI) is $39.10 billion. Since the operating cash flow is significantly higher than the net income, Meta receives a point for this criterion. This surplus of operating cash flow over net income suggests great cash generation ability, indicating the company’s earnings quality is robust. A consistent history of higher operating cash flow relative to net income, as seen in Meta’s financial data for the past years, further reinforces the strength of the company's operational efficiency. This is a positive trend for the Piotroski analysis.

Liquidity of Meta Platforms (META)

Leverage is declining?

Leverage measures the degree to which a company is utilizing borrowed money. It is crucial in evaluating financial risk.

The leverage for Meta Platforms (META) has increased from 0.1358 in 2022 to 0.1551 in 2023. This indicates that META is taking on more debt relative to its equity compared to the previous year. Over the last 20 years, the company's leverage has generally been low, with notable increases in recent years. While leverage can amplify returns, it also raises financial risk, especially if the company's revenue generation does not keep pace with its increased debt. Therefore, this is a negative trend, and hence, we assign it 0 points in the Piotroski Analysis.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term obligations with its current assets, indicating financial health and liquidity.

Meta Platforms (META) has seen an increase in its current ratio from 2.2034 in 2022 to 2.671 in 2023. This upward trend is a positive signal, suggesting improved liquidity and a stronger capacity to manage short-term liabilities. Historically, META's current ratio has fluctuated significantly, peaking at 12.9157 in 2017 and reaching a low of 2.2034 in 2022. Compared to the industry median, which remained relatively stable, META's ratio is currently higher than the median of 2.2043 in 2023, indicating better liquidity than its peers. Therefore, META earns 1 point for this criterion in 2023, marking a positive shift in its financial health.

Number of shares not diluted?

The change in Shares Outstanding measures the increase or decrease in the total number of shares issued by the company. A decrease is generally positive.

For 2022, Meta Platforms had 2,687,000,000 outstanding shares, which decreased to 2,574,000,000 in 2023. This represents a decrease in outstanding shares, which earns Meta Platforms 1 point according to Piotroski's F-score system. This trend is positive, as companies often repurchase shares when they believe their stock is undervalued or want to return capital to shareholders. Looking at the trend over the last 15 years: 2009 (2,732,000,000), 2010 (2,361,000,000), 2011 (2,332,000,000), 2012 (2,166,000,000), 2013 (2,517,000,000), 2014 (2,664,000,000), 2015 (2,853,000,000), 2016 (2,925,000,000), 2017 (2,956,000,000), 2018 (2,921,000,000), 2019 (2,854,000,022), 2020 (2,851,000,000), 2021 (2,815,000,000), 2022 (2,687,000,000), and 2023 (2,574,000,000), the shares outstanding have seen fluctuating trends, yet recent years show a reduction, implying share buybacks and optimizing shareholder value.

Operating of Meta Platforms (META)

Cross Margin is growing?

Change in Gross Margin measures a company’s operating performance. By comparing the Gross Margin of different years, investors can gauge the efficiency and profitability of the company's core activity.

The Gross Margin for Meta Platforms (META) rose from 0.7835 in 2022 to 0.8076 in 2023. This 0.0241 increase is indicative of improved efficiency and profitability. For further context, comparing this to the industry median Gross Margin, META consistently outperforms its peers, with the industry median being 0.6255 in 2022 and 0.7025 in 2023. Meta Platforms' sustained high Gross Margins, even through economic cycles, highlights its strong market position and operational effectiveness. This positive trend adds 1 point in the Piotroski analysis.

Asset Turnover Ratio is growing?

The asset turnover ratio measures a company's ability to generate sales from its assets.

In 2022, Meta Platforms reported an asset turnover ratio of 0.6631, which dropped to 0.6496 in 2023. This decline suggests Meta Platforms has become slightly less efficient in using its assets to generate sales. By previous year's data, starting from a peak value of 1.3204 in 2010, the recent declining trend raises concerns, earning a score of 0 on this criterion.