Last update on 2024-06-06

NiSource (NI) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Analyzing NiSource's (NI) 2023 financial health using the Piotroski F-Score, with a final score of 6/9, highlighting profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 6

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

NiSource (NI) has scored 6 out of 9 on the Piotroski F-Score, which indicates a fairly strong financial position. The company is profitable, has a positive cash flow, and exhibits good operational efficiency with high operating cash flows compared to net income. Over the past two decades, the company has shown steady performance in profitability and cash flow. However, it did not earn points for decreasing asset turnover and growing return on assets, indicating some inefficiencies. The company's leverage has slightly decreased, showing lower financial risk. Liquidity has improved as reflected by the growing current ratio, but the increasing outstanding shares indicate potential dilution for shareholders. Overall, the financial health indicated by the Piotroski score is positive, though not perfect, suggesting a solid, though not extraordinary, performance.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score of 6, NiSource (NI) looks like a stable stock with good profitability and cash flow, but some areas of inefficiency. For potential investors, it would be worth conducting further research into these areas of concern, such as the declining asset turnover and return on assets. Carefully consider the slight increase in financial risk due to growing share dilution. Overall, NiSource appears to be a reliable investment with the potential for stable returns, but with some limitations. Therefore, it is recommended for investors seeking stability but with the caution to watch for red flags in the areas of inefficiency and dilution.

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

Profitability of NiSource (NI)

Company has a positive net income?

Net income measures a company's profitability. Positive net income contributes significantly to the overall Piotroski score.

In 2023, NiSource (NI) reported a net income of $714,300,000, which is positive. This denotes that the company is profitable this year. Over the past two decades, NiSource's net income shows a trend of occasional fluctuations. Notably, it experienced losses in 2018 and 2020 but otherwise stayed mostly positive. The recent value of $714.3 million aligns with an overall upward trend since 2019. This positive value adds 1 point to the Piotroski score, reflecting solid performance in profitability.

Company has a positive cash flow?

The criterion assesses whether a company can generate enough cash flow from its core operations. Free cash flow that is positive usually indicates good financial health and operational efficiency.

For NiSource (NI), the cash flow from operations (CFO) in 2023 is $1,935,100,000, which is positive. This is a favorable indicator for the company's financial health. Adding 1 point for a positive CFO. Looking at the historical data for the past 20 years, it is evident that NiSource has consistently reported positive operating cash flows. For instance, in 2019, the CFO was $1,583,300,000 and increased substantially in 2023. The trend suggests significant operational efficiency and robust revenue-generating capabilities through its utility services.

Return on Assets (ROA) are growing?

Measured as the net income divided by the total assets, return on assets (ROA) indicates how profitable a company is relative to its total asset base. A higher ROA is indicative of better asset efficiency in generating revenue.

With NiSource's ROA decreasing from 0.0316 in 2022 to 0.0247 in 2023, the trend reflects a reduction in the company's asset efficiency. This indicates the firm is generating less net income per dollar of assets than it did in the previous year. Over the past two decades, NiSource has experienced varied ROA performance, with operating cash flow ranging from $472.9 million to $1.94 billion. Meanwhile, the industry median ROA tends to surpass NiSource's ROA, which was considerably higher over much of this period. The evident decline in NiSource's ROA in 2023 compared to 2022 warrants concern, failing to achieve the 1-point criteria established in the Piotroski Score. Thus, the score remains at 0 points for this criterion.

Operating Cashflow are higher than Netincome?

Operating cash flow measures the cash generated by a company's regular operating activities, excluding long-term capital investments and costs.

For NiSource (NI), the operating cash flow in 2023 was $1.9351 billion, significantly higher than the net income of $714.3 million. This comparison is favorable, as it indicates strong cash-generating ability without relying on accounting adjustments. Over 20 years, the company has shown increasing operating cash flows, peaking in 2023 after generally solid figures since 2003. This trend is positive, highlighting good operational efficiency: 1 point.

Liquidity of NiSource (NI)

Leverage is declining?

This criterion evaluates whether the company's leverage ratio has decreased compared to the previous year. Lower leverage signifies lower debt, reducing financial risk.

Comparing NiSource's leverage ratio of 0.3562 in 2022 and 0.3557 in 2023 reveals a slight but significant decrease. While minimal, this reduction in leverage is a positive trend because it indicates a reduction in the company's debt relative to its equity. Historically, NiSource's leverage has fluctuated, reaching as high as 0.4275 in 2020 and as low as 0.2847 in 2004. The trend over these two decades shows the company stabilizing its leverage within a moderate range. The decrease from 2022 to 2023 supports a trend towards lower financial risk, albeit the change is small.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. It is an important indicator of liquidity and financial health.

In 2023, NiSource's Current Ratio increased to 0.8546 from 0.5545 in 2022, marking a positive trend. This is beneficial as it indicates that the company's ability to cover short-term liabilities with short-term assets has improved. Historically, over the past two decades, NiSource's current ratio has hovered below the industry median. However, the 2023 ratio of 0.8546, though still below the industry median of 0.7386, shows a significant improvement compared to earlier years, demonstrating better financial health and liquidity management. Thus, NiSource adds 1 point for this criterion.

Number of shares not diluted?

Change in shares outstanding is important to assess a company's capital regulations and potential dilution impact on existing shareholders.

When comparing the Outstanding Shares of NiSource, Inc. (NI) between the year 2022 and 2023, we observe an increase from 407,100,000 shares in 2022 to 416,100,000 shares in 2023. This represents an approximate 2.2% growth in the number of shares outstanding. This upward trend is consistent with the historical data observed over the past 20 years, as NiSource has gradually increased its outstanding shares from 261,600,000 in 2003 to 416,100,000 in 2023. While issuing more shares can provide the company with additional capital for expansion or to pay off debt, it can also indicate potential dilution for existing shareholders, lowering their voting power and potentially their share value. As this increase doesn't align with Piotroski's F-Score criteria for a positive indicator (which would be a decrease in outstanding shares), this would score 0 points on his scale.

Operating of NiSource (NI)

Cross Margin is growing?

Change in Gross Margin measures the profitability change over time. An increase usually indicates improved cost efficiency or higher pricing power.

The Gross Margin for NiSource (NI) increased from 0.3847 in 2022 to 0.45 in 2023. This indicates a positive trend, signaling improved profitability and cost management. For comparison, the industry median Gross Margin was 0.3255 in 2023, significantly lower than NiSource's 0.45, highlighting NI's superior performance relative to its peers over the same period. This improvement earns NiSource a full 1 point in this criterion.

Asset Turnover Ratio is growing?

Change in Asset Turnover measures how efficiently a company uses its assets to generate sales over a period. It is calculated by dividing net sales by average total assets.

In 2023, NiSource (NI) registered an Asset Turnover ratio of 0.1905, a decrease from 0.2299 in 2022. This decline signifies a reduction in efficiency in utilizing assets to generate revenue, reflecting either decreased sales or increased assets. Historic data reveals a downward trend over the two decades from 0.3727 in 2003 to 0.1905 in 2023, highlighting ongoing efficiency challenges for NiSource. This trend is indicative of a struggle in asset management or sales generation efficiency. Hence, no point is awarded as Asset Turnover decreased.