Last update on 2024-06-04

Procter & Gamble (PG) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Analyze Procter & Gamble's financial health in 2023 using the Piotroski F-Score. Detailed insights on profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 6

We're running Procter & Gamble (PG) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

Procter & Gamble (PG) achieved a Piotroski F-Score of 6/9. This score indicates a reasonably strong financial position based on nine criteria of profitability, liquidity, and operating efficiency. Highly positive indicators include net income, cash flow from operations, operating cash flow surpassing net income, share reduction, gross margin ratio, and asset turnover ratio. Less favorable aspects involve return on assets, leverage, and current ratio, which did not show improvements in the most recent year.

Insights for Value Investors Seeking Stable Income

Procter & Gamble demonstrates solid financial health in terms of profitability and operational efficiency, which are encouraging for potential investors. However, slight concerns remain regarding asset return, leverage, and liquidity. Thus, it may be worth considering but should be thoroughly compared with industry peers before making an investment.

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

Profitability of Procter & Gamble (PG)

Company has a positive net income?

Net income reflects a company's bottom line profit, crucial for assessing its financial health.

Procter & Gamble (PG) reported a net income of $14.65 billion in 2023, indicating a positive trend. Over the past 20 years, PG has generally shown increasing or stable net income, except for a few dips. This consistent profitability bodes well for the company's financial stability and investor confidence. Therefore, this criterion scores 1 point.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) criterion checks if a company's cash flow from its core business operations is positive. Positive CFO indicates that the company is generating enough cash from its main activities to sustain and potentially grow its business.

The CFO for Procter & Gamble (PG) in 2023 is $16,848,000,000, which is a positive value. The historical data shows a consistent trend of positive CFO over the last two decades, with a steady increase from $8,700,000,000 in 2003 to the current value. This positive trend is an indicator of robust financial health, suggesting that Procter & Gamble has strong and sustainable core business operations. The addition of 1 point for having a positive CFO is therefore justified and favorable.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA): Evaluates the company's efficiency in generating profits from its assets year over year.

The ROA for Procter & Gamble (PG) decreased from 0.1247 in 2022 to 0.1231 in 2023. Therefore, the score for this criterion is 0, as the ROA did not improve in 2023. This could indicate a slight downturn in the company's ability to generate profits from its assets. Over the last 20 years, PG's ROA has shown various fluctuations, with notable peaks and troughs corresponding to market conditions and internal organizational changes. Comparative industry analysis also shows that PG's ROA is significantly lower than the industry median, which was around 0.5634 in 2022 and 0.4411 in 2023. This suggests that PG might be underperforming relative to its peers, which could be a red flag for investors seeking optimal asset utilization.

Operating Cashflow are higher than Netincome?

Compare Operating Cash Flow with Net Income to determine earnings quality. Higher OCF suggests better quality.

In 2023, Procter & Gamble (PG) reported an Operating Cash Flow (OCF) of $16,848,000,000 and a Net Income of $14,653,000,000. As OCF surpasses Net Income, it indicates high earnings quality. This trend suggests that PG efficiently converts its sales into cash and manages its operating expenses well. Historically, PG’s OCF has been consistently higher than its Net Income, reaffirming its earnings robustness. Thus, PG earns 1 point here.

Liquidity of Procter & Gamble (PG)

Leverage is declining?

Change in Leverage criterion for Procter & Gamble (PG) essentially examines the company's use of debt and its ability to meet financial obligations. It is important as it affects financial stability and risk exposure. A decrease in leverage indicates improved risk management and financial health, which can be advantageous to investors.

The leverage for Procter & Gamble (PG) has increased slightly from 0.2 in 2022 to 0.2067 in 2023. This marks a 3.35% rise in leverage. While this is a minor increase, it should not be dismissed. Historical data over the last 20 years show fluctuating leverage levels with a significant decline from a peak of 0.2651 in 2006 to lower levels in subsequent years. An upward trend in leverage may suggest higher reliance on debt financing. Given the minor increase, PG would not score a point for decreasing leverage, which might raise concerns among risk-averse investors.

Current Ratio is growing?

The current ratio measures a company's ability to pay short-term liabilities with short-term assets. It's crucial for understanding its liquidity position.

For Procter & Gamble (PG), the current ratio has decreased from 0.6545 in 2022 to 0.6334 in 2023. This indicates a slight decline in the company's liquidity. While this downward trend may not considerably impair the company's ability to meet short-term obligations, attention is warranted. Notably, over the last two decades, PG's current ratio has consistently lagged behind the industry median. For instance, the industry medians were 1.599 in 2022 and 1.5029 in 2023, both significantly higher than PG’s figures. This persistent discrepancy suggests a relatively poorer liquidity position compared to peers, potentially raising red flags among cautious investors. Thus, for the Piotroski analysis, this criterion gets a score of 0 for 2023 as the ratio did not improve.

Number of shares not diluted?

This criterion evaluates if Procter & Gamble has reduced its outstanding shares over the given period, indicating share buybacks which can signal management's confidence in the company.

In 2022, Procter & Gamble had 2,457,000,000 outstanding shares, which decreased to 2,368,200,000 shares in 2023. This reduction adds 1 point according to the Piotroski Score criterion as it indicates that PG is buying back shares. Such activity typically signals that the company believes its shares are undervalued or lacks better investment opportunities. When we look at the trend over the past 20 years, we see a fluctuation in shares outstanding, with significant buybacks in recent years—from 2.8 billion shares in 2003 to the current 2.36 billion shares (2023). This continuous reduction in outstanding shares shows a strong trend in favor of stockholder returns.

Operating of Procter & Gamble (PG)

Cross Margin is growing?

Gross Margin measures the percentage of revenue that exceeds the company's cost of goods sold. It is a critical indicator of a company's financial health, profitability, and efficiency.

Procter & Gamble's Gross Margin increased slightly from 0.4743 in 2022 to 0.4786 in 2023. This marks a positive trend and adds 1 point to the Piotroski score. Over the past 20 years, Procter & Gamble's Gross Margin has shown fluctuations but has largely remained competitive compared to the Industry Median Gross Margin, which stood at 0.4411 in 2023, significantly lower than P&G’s margin.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales. It is crucial in evaluating operational performance.

Comparing Procter & Gamble's Asset Turnover for 2023 (0.689) with its value in 2022 (0.6781), we see an increase. This results in an additional point in the Piotroski Score. Over a 20-year period, the metric has declined overall, from 1.0269 in 2003 to a low around 0.507, before improving in the last decade. This improvement indicates more efficient usage of their assets in the current year, compared to the prior year.