Last update on 2024-06-05

NetApp (NTAP) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

NetApp (NTAP) receives a Piotroski F-Score of 4/9 for 2023, indicating moderate financial health based on profitability and liquidity metrics.

Short Analysis - Piotroski Score: 4

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

NetApp (NTAP) has a Piotroski F-Score of 4 out of 9. The score is based on profitability, liquidity, and leverage criteria. They showed strengths in profitability with a positive net income and operating cash flow, as well as a positive return on assets (ROA) and a reduction in outstanding shares due to stock buybacks. However, they had weaknesses in operating cash flow compared to net income, leverage increase, current ratio, a decline in gross margin, and asset turnover ratio.

Insights for Value Investors Seeking Stable Income

NetApp's Piotroski F-Score of 4 suggests a mixed financial health. As an investor, you may look deeper into their strengths in profitability and share reduction plans. However, consider the weaknesses in their liquidity and efficiency before making a decision. It could be interesting to watch but worth being cautious with investments.

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

Profitability of NetApp (NTAP)

Company has a positive net income?

Net income indicates the overall profitability of the company after accounting for all expenses. Higher values suggest better performance.

For the fiscal year 2023, NetApp (NTAP) reports a net income of $1,274,000,000, which is a positive figure. Hence, one point is awarded based on this criterion. Examining a 20-year span, the net income demonstrates a general upward trend with remarkable peaks such as $1,169,000,000 in 2017 and the recent $1,274,000,000 in 2023. This positive net income underlines consistent profitability and suggests sound financial health. Such trends often enhance investor confidence and market position.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the cash generated by a company’s regular business operations. It's important as it indicates the ability of the core operations to generate sufficient cash to maintain and grow the business.

In 2023, NetApp (NTAP) reported a Cash Flow from Operations (CFO) of $1,107,000,000, which is positive. This adds 1 point in the Piotroski Analysis score, indicating a healthy cash inflow from core business activities. Over the past 20 years, NetApp's CFO has seen significant fluctuations, reaching a peak of $1,478,000,000 in 2018 and maintaining positive values consistently, which demonstrates robust operational cash generation capability. The ability to generate positive cash flow from operations over a long period underpins the financial stability and operational efficacy of NetApp, making it a favorable indicator for investors.

Return on Assets (ROA) are growing?

Analyzing the change in Return on Assets (ROA) reveals a firm's efficiency in generating profit from its assets. A rising ROA indicates improving profitability and efficient asset utilization, key for evaluating management effectiveness and operational performance.A positively trending ROA can signal robust financial health and competitive positioning, while a declining ROA may prompt closer scrutiny.

NetApp's ROA jumped from 0.0967 in 2022 to 0.1284 in 2023, reflecting enhanced asset profitability. This increment qualifies NetApp for 1 point under the Piotroski criterion. Historically, their ROA positions slightly below the industry median (e.g., 0.3501 median in 2023). This improvement suggests solid management effectiveness in asset employment despite being below peers. The consistent operating cash flow over the last two decades also supports this positive trend. Thus, the trend is good with ROA marking an evidently positive shift.

Operating Cashflow are higher than Netincome?

One criterion of the Piotroski F-Score analysis is that a company's operating cash flow (OCF) should be higher than its net income. This measure ensures that the company's operations are generating sufficient cash, which can be seen as a sign of high-quality earnings. It suggests that the earning figures reported on the income statement are not significantly affected by non-cash items and that the company's earnings are more sustainable over the long term.

In 2023, NetApp reported an operating cash flow of $1,107,000,000 compared to a net income of $1,274,000,000. Since the operating cash flow is lower than the net income, this criterion is not met, so NetApp scores 0 points for this criterion. Examining the historical data, NetApp has had periods where its operating cash flow surpassed net income from time to time, indicating fluctuating cash earnings quality over the years. For example, in 2019, the OCF was $1,341,000,000 while net income was $1,169,000,000, indicating stronger cash earnings quality during that period. However, recent trends show a tightening of cash-generating efficiency relative to net income.

Liquidity of NetApp (NTAP)

Leverage is declining?

Change in leverage has to be assessed to understand the company's debt levels. Lower leverage indicates lower financial risk.

Comparing the leverage of 0.2636 in 2022 with 0.2686 in 2023, we can see that NetApp's leverage has increased slightly. This increase from 0.2636 to 0.2686 in one year means that the company is taking on more debt relative to its equity, which typically translates to higher financial risk. Looking at the historical leverage data over the last 20 years, it is notable that in earlier years, the leverage was relatively low or even zero. However, there has been a significant upward trend in leverage starting from around 2008, reaching a peak in recent years. For 2023, NetApp cannot add a point for change in leverage as it has actually increased, aligning with the trend seen from 2022’s leverage of 0.2636 increased to 0.2686 in 2023. Thus, the company will set it to 0 points for this criterion.

Current Ratio is growing?

Explain the criterion for NetApp (NTAP) and why it is important to consider

The Current Ratio compares a company's current assets to its current liabilities. It's a liquidity measure that indicates the company's ability to pay short-term obligations. A higher ratio suggests better financial health as it implies more readily accessible assets to cover upcoming liabilities.

Number of shares not diluted?

Change in shares outstanding measures the variation in a company's outstanding shares over time. A decrease in outstanding shares is generally perceived as a positive indicator, signifying share buyback and potentially improving earnings per share.

Between 2022 and 2023, NetApp's outstanding shares decreased from 223,000,000 to 217,000,000. This 6,000,000 reduction suggests that the company is engaging in share buybacks, a strategy often aimed at enhancing shareholder value. Over the past 20 years, NetApp's shares outstanding have also mostly trended downward, declining from a peak of 393,700,000 in 2011 to the current 217,000,000 in 2023. Such consistent buybacks indicate NetApp's commitment to returning capital to shareholders and boosting earnings per share. Therefore, a point should be added for this criterion, making it a favorable trend.

Operating of NetApp (NTAP)

Cross Margin is growing?

NetApp's Gross Margin measures the proportion of revenue that exceeds the cost of goods sold. It's an essential indicator of a company's financial health, profitability, and efficiency in production or service delivery.

Comparing NetApp's Gross Margin in 2023 (0.6616) to that in 2022 (0.6679) reveals a decrease. Therefore, NetApp earns 0 points in this criterion, indicating a negative trend. A shrinking Gross Margin could signal increased production costs, stiffer competition, or reduced pricing power. Historically, NetApp's Gross Margin has fluctuated but generally remained above the industry median, which stood at 0.3501 in 2023. The declining trend, albeit marginal down from 2022, places NetApp's performance in a slightly less favorable light. Over the past 20 years, their Gross Margin hit a peak of 0.6694 in 2020 and a low of 0.5842 in 2009. Despite the dip, NetApp still substantially outperforms within its industry, giving some room for optimism in its cost-efficiency practices and competitive pricing strategies.

Asset Turnover Ratio is growing?

The Change in Asset Turnover criterion assesses how efficiently a company utilizes its assets to generate sales. A higher ratio typically indicates greater efficiency.

In 2023, NetApp's Asset Turnover was 0.6412, compared to 0.6518 in 2022. The slight decrease implies a drop in asset efficiency, suggesting that the company generated fewer sales per dollar of assets. Over the last 20 years, NetApp's Asset Turnover has seen various fluctuations, peaking at 0.8547 in 2008 and witnessing a continuous decline until recent years. This predicament results in a score of 0 as the turnover has indeed decreased.