Last update on 2024-06-07

Photronics (PLAB) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Photronics (PLAB) Piotroski F-Score 2023 analysis indicates a score of 6/9, reflecting financial strength in profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score for Photronics (PLAB) is 6 out of 9, indicating a moderately strong financial position. Here’s a breakdown by category: Profitability: Photronics is doing well in profitability with positive net income and cash flow. However, its Return on Assets (ROA) declined slightly in 2023, underperforming compared to the industry. Liquidity and Leverage: The company demonstrates strong liquidity with an increasing current ratio and reduced leverage, reflecting less reliance on debt. Operational Efficiency: Margins have improved, but the gross margin still lags behind industry standards. There's also a slight decline in asset turnover and some dilution in outstanding shares. In total, Photronics scores 6 points for positive indicators in net income, cash flow, leverage, current ratio, operating cash flow over net income, and gross margin improvement.

Insights for Value Investors Seeking Stable Income

Given a Piotroski F-Score of 6, Photronics shows signs of financial stability, stronger cash flows, and less debt reliance, making it an attractive prospect if you’re looking for a moderately strong investment. However, keep an eye on its lower ROA and asset turnover as compared to the industry and recent share dilution. A deeper look into why these metrics aren't as strong could help gauge potential risks and returns better.

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

Profitability of Photronics (PLAB)

Company has a positive net income?

Net income refers to the total profit of a company after all expenses have been deducted. A positive net income indicates profitability, which is crucial for assessing a company's financial health.

For Photronics (PLAB), the net income for the year 2023 is $125,485,000, which is positive. Therefore, it adds 1 point in the Piotroski F-Score analysis. Reviewing the last 20 years of net income, the company has shown fluctuating profits, with notable losses in years such as 2003, 2008, and 2009. The trend shows recovery post-2018 with a significant increase starting from 2021, culminating in the highest net income in two decades in 2023. This positive trend is indicative of good financial health and potentially improved operational efficiency.

Company has a positive cash flow?

Evaluates if Photronics (PLAB) has a positive Cash Flow from Operations (CFO). Vital for assessing the company's financial health and cash-generating efficiency.

Photronics (PLAB) reported a positive CFO of $302.18 million in 2023, up from $275.19 million in 2022. Positive CFO signifies that Photronics is generating sufficient cash from its core operations, reflecting healthy business fundamentals. Notably, Photronics has achieved positive CFO every year over the past two decades, with this latest year's CFO being the highest in 20 years. Hence, Photronics earns 1 point for having a positive CFO.

Return on Assets (ROA) are growing?

Return on Assets (ROA) measures how efficiently a company can manage its assets to produce profits. A rising ROA indicates improving efficiency.

In 2023, Photronics (PLAB) experienced a slight decline in ROA from 0.091 in 2022 to 0.0883. This trend is concerning as the company is becoming slightly less efficient at converting its assets into net income. Therefore, it scores 0 points for this criterion. Moreover, when we compare these figures to the industry median ROA, which stands significantly higher at approximately 0.4718 for 2023, it becomes evident that Photronics lags considerably behind its industry peers in terms of asset efficiency. The trend over the last 20 years shows that the company's operating cash flow has grown significantly, indicating upward momentum, yet that hasn't translated to better ROA in recent years.

Operating Cashflow are higher than Netincome?

Evaluating if a company's operating cash flow exceeds its net income assesses its earnings quality. Positive operating cash flow indicates robust cash earnings, crucial for financial health.

For Photronics (PLAB), the operating cash flow in 2023 is $302.18 million, significantly higher than its net income of $125.49 million. This disparity is positive, signaling robust operational efficiency, as the company generates substantial cash compared to accounting profit. Historically, the company maintained positive cash flow, although net income fluctuated, evidencing consistent cash generation from operations. This trend contributes 1 point to the Piotroski score, reflecting healthy earnings integrity with strong operational cash flow backing net income.

Liquidity of Photronics (PLAB)

Leverage is declining?

A change in leverage indicates how much debt a company is using to finance its assets. Lower leverage is preferable as it indicates less risk.

Comparing the leverage ratios from 2022 and 2023, Photronics shows a decrease from 0.0246 to 0.0118. This reduction in leverage is favorable, suggesting the company is relying less on debt to finance its operations, thus reducing risk. Additional data over the last 20 years indicates a significant downward trend in leverage, from a high of 0.4255 in 2003 to its current low. This long-term reduction reflects a consistent strategy towards minimizing debt, which is positive for investors.

Current Ratio is growing?

Current ratio measures a company's ability to cover its short-term liabilities with short-term assets.

Photronics (PLAB) saw its current ratio increase from 3.3264 in 2022 to 4.2406 in 2023, which adds 1 point per the Piotroski criteria. This is a positive development indicating stronger liquidity. Looking at the historical data for the past 20 years, PLAB's current ratio is not only higher year-on-year but also notably above the industry median of 3.161 in 2023. For instance, in the challenging year of 2009, PLAB had a current ratio of 1.9899 compared to the industry median of 3.1792, showcasing its variability over economic cycles. The upward trend in the current ratio is a positive signal, reflecting an improvement in the company's ability to meet short-term obligations.

Number of shares not diluted?

The criterion assesses whether a company is reducing its equity dilution by comparing the change in shares outstanding. Decreased shares outstanding signifies potential share buybacks, indicating confidence in the company's future.

Photronics' outstanding shares have increased from 60,559,000 in 2022 to 61,139,000 in 2023, indicating that the company did not reduce its equity dilution during this period. This increase of 580,000 shares suggests that the company might have issued more shares. Historical data reveals fluctuations, but the latest trend fails this criterion, resulting in a score of 0.

Operating of Photronics (PLAB)

Cross Margin is growing?

Change in Gross Margin: Compare the Gross Margin of 0.3768 in 2023 with the Gross Margin of 0.3568 in 2022.

In 2023, Photronics (PLAB) reported a Gross Margin of 0.3768, an increase from its 2022 Gross Margin of 0.3568. This represents a growth of 0.02 or roughly 5.6%. However, it is worth noting that this figure, while improved, still falls short of the Industry Median Gross Margin of 0.4718 in 2023. While the consistent growth is indeed a positive sign and earns the company a point in this context, it will need to continue improving to close the gap with industry peers. Reflecting on the last 20 years, Photronics' gross margin data shows long-term fluctuation but a significant improvement from lower margins seen pre-2019, indicating a robust growth trend.

Asset Turnover Ratio is growing?

The change in asset turnover measures if the company generates more revenue per unit of its assets.

In the case of Photronics (PLAB), the asset turnover ratio declined slightly from 0.6318 in 2022 to 0.6278 in 2023. This indicates that the company generated slightly less revenue per unit of its assets in 2023 compared to 2022, signaling a minor inefficiency. This criterion, therefore, receives 0 points. Observing the long-term data, we see fluctuations, with ratios as high as 0.6729 in 2011 and as low as 0.4004 in 2007. The current ratio is slightly above the 20-year average, indicating relatively stable but not peak performance.