Last update on 2024-06-07

MKS Instruments (MKSI) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

MKS Instruments (MKSI) Piotroski F-Score Analysis 2023: Score of 4/9. Assessing financial strength through profitability, liquidity, and efficient asset use.

Short Analysis - Piotroski Score: 4

We're running MKS Instruments (MKSI) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

MKS Instruments (MKSI) has a Piotroski F-Score of 4 out of 9. This score evaluates the company on nine different criteria to assess its overall financial health based on profitability, liquidity, and operating efficiency. Specifically, the company earned points for having a positive cash flow from operations, operating cash flow being higher than net income, an increasing current ratio, and growing gross margins. On the downside, MKS Instruments failed to meet criteria for positive net income, growing return on assets, declining leverage, non-dilution of shares, and increasing asset turnover.

Insights for Value Investors Seeking Stable Income

Based on the given analyses, MKS Instruments shows some strengths, particularly in its cash flow and liquidity metrics. However, the significant negative net income and rising debt are concerning. Therefore, it's recommended to proceed cautiously if considering this stock for investment. Conducting further in-depth research on the reasons behind the negative net income and increased leverage is advisable before making a final decision.

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

Profitability of MKS Instruments (MKSI)

Company has a positive net income?

The Piotroski criterion evaluates if a company's Net Income is positive over the most recent fiscal year.

For 2023, MKS Instruments (MKSI) reported a net income of -$1.841 billion, which is a significant decline from previous years. Evaluating this criterion under the Piotroski score, it yields 0 points because the net income is negative. Historically, MKSI has had positive net income for most of the past 20 years, except in 2009 and 2023. A company consistently having positive net income is generally perceived as financially healthy. The negative net income in 2023 is alarming, reflecting potential operational difficulties or substantial one-time costs, therefore detrimental to this financial health criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) reflects the cash generated by a company’s core business operations and directly indicates its liquidity and overall financial health.

For the year 2023, MKS Instruments (MKSI) reported a positive CFO of $319 million. This is especially favorable as it adds 1 point in the Piotroski Analysis score, highlighting robust operational efficiency and financial health. Analyzing the trend of the past 20 years, we observe that the company has consistently maintained a positive CFO since 2004, barring a negative plot in 2003. This demonstrates sustained operational strength and resilience through various economic cycles. For instance, MKSI had remarkable positive CFO figures in 2020 ($513 million), 2021 ($640 million), and 2022 ($529 million), reflecting stability and continual growth.

Return on Assets (ROA) are growing?

RoA indicates a company's efficiency in using its assets to generate profit, crucial for assessing management’s effectiveness.

In 2023, the ROA for MKS Instruments was -0.1786, notably down from 0.0415 in 2022. This decline entails that the company failed to generate profits from its assets, a drastic shift from the previous year; hence the score is 0. Additionally, considering the historical context, 2023 marks the company's first negative ROA over the last 20 years while the industry median consistently remained positive, showcasing a stark gap in performance.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income.

For MKS Instruments (MKSI), the Operating Cash Flow in 2023 was $319 million, while the Net Income was significantly lower at -$1.841 billion. This enormous disparity between the two metrics is particularly notable. Generally, when Operating Cash Flow is higher than Net Income, it signifies a company’s effective cash generation capabilities. For MKS Instruments, the higher Operating Cash Flow compared to the Net Income showcases its robust operating efficiency. The consistent growth in Operating Cash Flow observed over the last 20 years—despite occasional dips—indicates a generally healthy cash-generating capacity. However, the substantial negative Net Income for 2023 requires deeper analysis into the specificity of write-offs or extraordinary expenses involved. Given the situation, MKS Instruments earns 1 point for this criterion, indicating positive cash flow management despite the significant net loss. Looking closer at the last few years, the company's cash flow levels remained strong, suggesting that the recent plunge in net income is more of an anomaly than a regular occurrence, potentially due to non-recurring impacts.

Liquidity of MKS Instruments (MKSI)

Leverage is declining?

Change in Leverage examines the change in the company's debt-to-equity ratio to assess its financial stability. An increased leverage ratio suggests rising debt levels.

The leverage for MKS Instruments has increased from 0.4392 in 2022 to 0.5375 in 2023, indicating a rise in the company's debt relative to its equity. Over the past 20 years, MKS Instruments has generally maintained a low leverage ratio, often close to zero. However, starting in 2014, leverage began increasing, peaking in 2023. This shift could imply potential issues in financial management or expanded borrowing to finance growth. The rise in leverage is often perceived negatively, as it may suggest higher financial risk. Therefore, MKS Instruments does not meet the Piotroski criterion for this factor and will receive 0 points.

Current Ratio is growing?

The current ratio, a liquidity ratio that measures a company's ability to cover its short-term obligations with its short-term assets, is essential to understand. A rising ratio often indicates improving liquidity.

In 2023, MKS Instruments' current ratio rose to 3.1792 from 2.9349 in 2022, showing a healthy trend. This increase is significant as it points towards improved liquidity, resulting in a score of 1 for this criterion. When examining the 20-year historical data, MKS Instruments has often maintained a current ratio above the industry median, signifying strong liquidity management. The industry median for 2023 stands at 2.6482, further illustrating MKS Instruments' favorable position. Therefore, the visible upward trend in the current ratio brings positive insights into the company's liquidity status.

Number of shares not diluted?

Changes in shares outstanding can signal capital raising activities or share buybacks. Tracking this can indicate financial strategies.

The Outstanding Shares for MKS Instruments (MKSI) increased from 59,700,000 in 2022 to 66,800,000 in 2023. This increase of approximately 7.1 million shares indicates that the company possibly issued new shares. Compared to previous years, this is the largest jump in Outstanding Shares over the last two decades. Reflecting negatively for this criterion, MKS Instruments earns 0 points.

Operating of MKS Instruments (MKSI)

Cross Margin is growing?

Gross Margin is a critical profitability metric, showing percentage of total revenue remaining after covering direct costs. Net Gross Margin expansion signals higher profitability and efficient cost management.

For MKS Instruments (MKSI), the Gross Margin increased from 0.4361 in 2022 to 0.4533 in 2023. A rise in Gross Margin signifies improved profitability and better control over production costs. Over the past two decades, MKS Instruments has generally maintained a competitive Gross Margin, often close to or above the industry median. Specifically, the increase in 2023 compared to 2022 indicates a positive trend and awards 1 point in the Piotroski Analysis. Historically, this company's Gross Margin peaked at 0.472 in 2018 and has shown resilience, highlighted by the improvement to 0.4533, despite recent industry median declines.

Asset Turnover Ratio is growing?

Asset Turnover assesses a company's efficiency in using its assets to generate sales, calculated as sales divided by total assets

The Asset Turnover for MKS Instruments (MKSI) has decreased from 0.4424 in 2022 to 0.3514 in 2023. This results in a zero score for this criterion. Historically, the company's Asset Turnover has ranged significantly over the past 20 years, reaching a high of 0.9714 in 2010 and now hitting the lowest point at 0.3514 in 2023. This trend may suggest potential inefficiencies in utilizing assets to generate revenue, which could be a warning sign for potential investors. The declining trend needs to be monitored closely to understand the underlying causes and corrective measures.