Last update on 2024-06-07

Patterson Companies (PDCO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Detailed Piotroski F-Score Analysis of Patterson Companies (PDCO) for 2023: scoring 4/9, focusing on profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 4

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

The Piotroski F-Score of Patterson Companies (PDCO) is 4 out of 9, signaling a mediocre financial position. From the analysis, here are key points: - Positive net income with consistent increases recently, indicating a recovery. - Negative cash flow from operations and decreasing ROA, highlighting poor cash generation and asset efficiency. - Decrease in leverage, suggesting lower financial risk but slightly declining short-term liquidity (current ratio). - Positive signs from share buybacks and growing gross margin, suggesting enhanced shareholder value and improved profitability. However, asset turnover ratio has decreased, showing a slip in operational performance.

Insights for Value Investors Seeking Stable Income

Considering the Piotroski score and the detailed analysis, Patterson Companies (PDCO) shows some positive trends in profitability and shareholder value but faces challenges with cash flow and operational efficiency. While it has recovered in net income and reduced leverage, the persistent negative cash flow and declining asset utilization may pose risks. Therefore, potential investors should cautiously consider PDCO, balancing its strengths against its operational and liquidity challenges. More in-depth research and comparison with industry peers is recommended before any investment.

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

Profitability of Patterson Companies (PDCO)

Company has a positive net income?

Net Income is the profit of a company after all expenses and taxes have been deducted.

The net income for Patterson Companies in 2023 is $207,557,000, which is positive. Over the last 20 years, net income has shown substantial variability, including a significant loss in 2020. However, a return to profitability in 2021 with $155,981,000 net income, increasing to $203,210,000 in 2022, and further to $207,557,000 in 2023, indicates a strong recovery and positive performance in recent years. Therefore, this criterion receives 1 point.

Company has a positive cash flow?

Cash Flow from Operations (CFO) measures the amount of cash generated by a company's normal business operations.

For Patterson Companies (PDCO), the CFO in 2023 is -$754,852,000, indicating a negative cash flow. This is a concerning trend as a positive CFO is crucial for a company’s sustainability. Over the last 20 years, Patterson Companies' CFO has exhibited volatility, with significant declines in recent years. In 2003, the CFO was $86,743,000 and peaked at $321,158,000 in 2012. However, since 2017, the CFO has been consistently negative. This trend is unfavorable, suggesting operational challenges and potentially impacting the company's ability to finance its activities.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) is critical as it measures the profitability relative to the assets held by the company. An increasing ROA indicates that the company is using its assets more efficiently to generate profits.

In 2023, Patterson Companies (PDCO) experienced a slight decrease in ROA to 0.0739 from 0.074 in 2022, which results in a score of 0. This decline, although minor, emphasizes a slightly decreased efficiency in using its assets to generate profits. Despite industry trends generally favoring higher ROA, Patterson Companies has lagged with its ROA persistently under the industry median over the years. Given that operating cash flow for the company has also seen substantial negative figures in recent years, the decline in ROA reflects broader issues in asset utilization and operational profitability.

Operating Cashflow are higher than Netincome?

Comparing Operating Cash Flow to Net Income indicates whether earnings are supported by actual cash flow, highlighting potential earnings quality issues.

In 2023, Patterson Companies reported an Operating Cash Flow of -$754,852,000 compared to a Net Income of $207,557,000. This significant discrepancy, where operating cash flow is negative despite positive net income, raises red flags. It suggests that the company may be reliant on non-cash adjustments, increasing financial risk. The history shows a declining trend in operating cash flow, with particularly troublesome years in 2020, 2021, and 2023. Given this trend, the score for this criterion is 0.

Liquidity of Patterson Companies (PDCO)

Leverage is declining?

Change in Leverage measures the variation in debt levels and financial risk from year to year.

The leverage ratio of Patterson Companies (PDCO) has increased from 0.194 in 2022 to 0.1801 in 2023. This indicates that the company's financial risk has decreased slightly, hence deserving a point in the Piotroski scoring. Historically, leverage has seen significant fluctuations over the last two decades, peaking at 0.3018 in 2004 and hitting a low of 0.067 in 2007. Recently, figures have been relatively stable since 2018. Therefore, the trend in 2023 marks a reduction in financial risk.

Current Ratio is growing?

The Current Ratio measures a company's ability to cover its short-term liabilities with its short-term assets. It indicates liquidity and financial health.

In comparing Patterson Companies (PDCO)'s Current Ratio of 1.6429 in 2023 with a Current Ratio of 1.6531 in 2022, we see a slight decrease. This means the Current Ratio did not increase in 2023, thus we set the score to 0 for this criterion. Analyzing historical data, PDCO's Current Ratio has fluctuated over the last 20 years, seeing its peak at 3.3495 in 2011. Compared to the Industry Median current ratio of 1.3772 in 2023, PDCO is still performing above the industry median by approximately 19.3%. However, the slight decrease from 2022 to 2023 implies a marginal decline in short-term liquidity, though not alarmingly below the industry average.

Number of shares not diluted?

Change in Shares Outstanding evaluates if the company is buying back shares, indicating confidence and value returned to shareholders.

Looking at Patterson Companies' data, Outstanding Shares decreased marginally from 97,277,000 in 2022 to 97,027,000 in 2023. This indicates that the company repurchased approximately 250,000 shares in the past year, which is a positive sign. Contrasting this with the trend over 20 years shows that, except for specific periods such as 2019-2021 where shares increased, the company generally reduced its outstanding shares (e.g., from 136,894,000 in 2003 to the latest figures in 2023). This consistency in buybacks often signifies a management team that is focused on enhancing shareholder value.

Operating of Patterson Companies (PDCO)

Cross Margin is growing?

Change in Gross Margin measures the percentage of revenue remaining after accounting for the cost of goods sold. It indicates the profitability and cost efficiency of a company.

For Patterson Companies (PDCO), the Gross Margin increased from 0.1983 in 2022 to 0.2122 in 2023. This 1.39 percentage point rise is encouraging because it suggests improved profitability and cost management. Over the past 20 years, PDCO's Gross Margin has shown significant volatility but has generally stayed above the industry median except for a dip between 2017 and 2022. The industry's median in 2023 stands at 0.2089, slightly below PDCO's margin, further stressing its competitive edge. This improvement assigns PDCO a score of 1 for the Gross Margin criterion in the Piotroski analysis.

Asset Turnover Ratio is growing?

Asset Turnover measures a firm's efficiency in using its assets to generate sales, key for assessing operational performance.

Comparing the Asset Turnover rates, Patterson Companies (PDCO) recorded a decrease from 2.3664 in 2022 to 2.3027 in 2023. This yields a score of 0 per the Piotroski F-score criteria. Despite this, their ratio remains above the long-term median, indicating relatively sustained efficiency in asset utilization.