Last update on 2024-06-06

Parker Hannifin (PH) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Discover Parker Hannifin's Piotroski F-Score analysis for 2023 with a final score of 7/9. Evaluate its financial strength through profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 7

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

The Piotroski F-Score assesses a company's financial health on a scale of 0 to 9 using nine criteria covering profitability, liquidity, and operational efficiency. Parker Hannifin (PH) scores 7, indicating generally strong financial health. Notable findings include its significant positive net income and cash flow, decreasing leverage, and growing gross margins. However, concerns arise due to its declining current ratio and asset turnover ratio, and lack of share buybacks.

Insights for Value Investors Seeking Stable Income

With a Piotroski score of 7, Parker Hannifin displays strong profitability and liquidity, coupled with efficient operations. Despite minor concerns around its asset turnover and current ratio, the company's overall robustness makes it a solid candidate for investors seeking undervalued stocks. Further investigation into its long-term sustainability and competitive positioning is recommended.

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

Profitability of Parker Hannifin (PH)

Company has a positive net income?

This criterion assesses whether the company has generated positive net income in the most recent year. Positive net income suggests profitability and operational efficiency, which is crucial for evaluating a company's financial health.

Parker Hannifin (PH) has generated a net income of $2,082,936,000 in 2023, which is a considerable figure. This marks a positive result and thus adds 1 point according to the Piotroski F-Score criteria. Over the past 20 years, Parker Hannifin has shown a commendable trend of increasing net income, barring minor fluctuations, signifying consistent operational performance and growth. Observing the data, the net income has generally been on an upward trajectory, especially noticeable in the significant jump from $1,315,605,000 in 2022 to $2,082,936,000 in 2023. This bodes well for the company as it underlines its resilience and ability to generate profits even amidst varying economic conditions.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the cash a company generates from its regular business operations.

In 2023, the Cash Flow from Operations (CFO) for Parker Hannifin (PH) is $2,979,930,000. This figure is positive, which is a strong indicator of the company’s ability to generate cash from its core business activities. Comparative data from the previous 20 years reveal a consistent upward trend, especially significant growth since 2020, when CFO surpassed $2 billion for the first time. This continuous growth in cash flow is a healthy sign, indicating robust operational efficiency. Hence, Parker Hannifin earns 1 point for having a positive CFO in 2023.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) assesses a company's ability to transform investments into earnings. An increasing ROA signifies improved efficiency in using assets.

In 2022, Parker Hannifin (PH) had an ROA of 0.0568, which rose to 0.0745 in 2023. The upward trajectory of their ROA indicates that the company has become more effective in utilizing its assets to generate earnings. This is a favorable trend and contributes positively towards the Piotroski F-Score by adding 1 point. Furthermore, the company's operating cash flow has generally been on the rise, peaking at approximately $2.98 billion in 2023, further demonstrating financial strength. In contrast, the industry median ROA has been stable at around 0.3492 for decades, highlighting Parker Hannifin's below-average, yet improving, performance.

Operating Cashflow are higher than Netincome?

Operating Cash Flow being higher than Net Income is indicative of quality earnings. It's essential because it shows that the company is generating sufficient cash, suggesting its profits are backed by tangible cash flows rather than accounting adjustments.

For Parker Hannifin (PH), the Operating Cash Flow (OCF) in 2023 stands at $2,979,930,000 while Net Income (NI) is $2,082,936,000. Since OCF is higher than NI, this criterion scores a full point. Over the last two decades, PH has mostly shown consistent cash flow from operations, increasing from $557.5M in 2003 to its peak at around $2.98B in 2023. Similarly, net income has grown from $196.3M in 2003 to $2.08B in 2023. Such a trend underpins healthy operational performance as it indicates robust cash generation outpacing net income, reducing the risk of earnings manipulation. Overall, this is a positive trend.

Liquidity of Parker Hannifin (PH)

Leverage is declining?

The change in leverage examines the variation in the company's financial leverage over time.

The leverage of Parker Hannifin (PH) has decreased from 0.376 in 2022 to 0.2936 in 2023. This reduction in leverage implies the company has improved its financial stability by using less debt. Given that historically the company has faced certain amplitudes in its leverage ratios, this downward trend is a positive development and PH indeed earns a point here. Especially notable is the decline from some of the higher leverage ratios seen in the mid to late 2010s.

Current Ratio is growing?

A company's current ratio compares its current assets to its current liabilities. This measures liquidity and the ability to cover short-term obligations.

In 2022, Parker Hannifin had a current ratio of 2.056, which significantly dropped to 0.8835 in 2023. This indicates a decrease in the company's liquidity. Over the last 20 years, its ratio fluctuated but has generally been above 1, indicating previous healthier liquidity levels. This 2023 decline is concerning, especially as it falls below the industry median of 1.7757. A score of 0 is assigned as this decrease is negative.

Number of shares not diluted?

This criterion checks if the company is actively managing its equity base. A decrease in outstanding shares is positive as it can suggest share buybacks, which return value to shareholders.

Between 2022 and 2023, Parker Hannifin's outstanding shares increased slightly from 128,539,387 to 128,367,842, indicating no share buybacks occurred. As a result, this criterion scores a 0. Historically, the company's shares have generally trended downwards over the past 20 years from 175,242,857 in 2003, suggesting past efforts to reduce share count have been more meaningful. This recent stasis may indicate a shift in corporate strategy or other financial prerogatives taking precedence.

Operating of Parker Hannifin (PH)

Cross Margin is growing?

The criterion evaluates whether the gross margin has increased compared to the previous year. It is a measure of a company's financial health and efficiency in managing production costs.

The Gross Margin for Parker Hannifin (PH) in 2023 increased to 0.3372 from 0.3349 in 2022. This 0.69% increase indicates better cost management and productivity, scoring 1 point in the Piotroski analysis. Note PH's median industry margin is higher, warranting further efficiency enhancement.

Asset Turnover Ratio is growing?

Asset Turnover measures how efficiently a company uses its assets to generate sales. It is important as it reflects the company's operational efficiency and effectiveness.

In 2023, Parker Hannifin's Asset Turnover decreased to 0.682 from 0.6854 in 2022. This decrease indicates a slight decline in the company's efficiency in using assets to generate revenue. Over the past two decades, there has been a notable downward trend in Parker Hannifin's Asset Turnover ratio, peaking at 1.2902 in 2007 and gradually declining to its current figure. This trend is concerning as it suggests a long-term deterioration in asset efficiency, warranting close monitoring by investors and stakeholders.