Last update on 2024-06-07

Power Integrations (POWI) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Piotroski F-Score Analysis for Power Integrations (POWI) reveals moderate financial health with a final score of 6/9 for 2023.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score evaluates companies based on nine criteria dealing with profitability, liquidity, and efficiency, aiming to find strong and undervalued stocks. Power Integrations (POWI) scored a 6 out of 9 on this scale. Positive aspects noted were net income, cash flow from operations, operating cash flow higher than net income, consistent current ratio growth, and no share dilution. However, the company showed weaknesses in return on assets, gross margin, and asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Given the score of 6 out of 9, Power Integrations (POWI) presents a moderately strong financial position with solid liquidity and cash flow but with some efficiency concerns. If you're an investor focusing on companies with a strong ability to generate cash and minimal debt, POWI could still be a good consideration. However, due to recent inefficiencies in asset utilization and declining gross margins, you might want to further investigate these areas or compare POWI with other companies before making a final decision.

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

Profitability of Power Integrations (POWI)

Company has a positive net income?

Net income is a key indicator of a company's profitability and financial health. Positive net income suggests the company is generating profit, which is a favorable sign for investors.

The net income for Power Integrations in 2023 is $55,735,000, which is positive. Therefore, according to Piotroski's criterion, Power Integrations earns 1 point for this category. When looking at the last 20 years of net income data, we observe fluctuations, including a notable dip in 2012. However, the company has generally shown resilience and profitability over the long term. In recent years, they have posted substantial gains, particularly the peak in 2019 with $193,468,000 in net income. The upward trend in 2023 is favorable, following a consistent pattern of profitability since 2013, barring the extraordinary year in 2019.

Company has a positive cash flow?

This criterion measures the ability of the company to generate cash through its core business operations.

For 2023, Power Integrations (POWI) exhibited a positive Cash Flow from Operations (CFO) of $65.76 million. According to the Piotroski F-score, a positive CFO is awarded 1 point. This positive cash flow is an important indicator as it signals that the company can generate adequate cash through its core business activities. Historically observing the data, while POWI’s CFO has fluctuated, it has generally been in the positive territory over the past 20 years. However, it is important to note a significant decline from previous years like 2021 ($230.87 million) and 2022 ($215.34 million) to 2023. This trend might raise concerns depending on underlying causes, such as market conditions or operational inefficiencies. Nonetheless, for 2023, POWI earns a 1 for this criterion.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) assesses a company's asset utilization efficiency and profitability year over year.

The comparison of the Return on Assets (ROA) for Power Integrations (POWI) from 2022 to 2023 reveals a significant decrease from 0.1842 in 2022 to 0.0672 in 2023. This indicates a reduction in the company's efficiency in generating profits from its assets. The performance trend for 2023, therefore, would receive 0 points under the Piotroski Analysis framework as the ROA did not increase. \n\nThe historical comparison of industry median ROA shows stability around the 0.4 mark, reflecting better overall efficiency within the broader sector. Additionally, over the past 20 years, POWI's operating cash flow peaked at 224,499,000 in 2019 but showed a downward trend reaching 65,759,000 by 2023, further substantiating the reduced asset profitability in recent years. This downturn compared to both the industry and the company’s historical performance underscores the need for strategic reassessment to enhance asset utilization and profitability.

Operating Cashflow are higher than Netincome?

This criterion assesses whether a company's net cash generated from operating activities exceeds its net income. It's important because persistent higher operating cash flow compared to net income suggests quality of earnings and strong operational efficiency.

For Power Integrations (POWI) in 2023, the Operating Cash Flow (OCF) was $65,759,000, while the Net Income (NI) stood at $55,735,000. The OCF exceeds the NI, thereby, in line with Piotroski's criteria, we assign 1 point. This reflects well on the company's earnings quality and operational efficiency, signaling good real cash earnings rather than potential non-cash or accounting-based earnings. Historically, the OCF has generally been robust, particularly post-2011 with peaks in 2019 ($224,499,000) and 2020 ($125,639,000), showing sustained operational strength even when net income showed more volatility, including years of negative figures like 2012 (-$34,404,000). Thus, the current trend confirms a strong performance and reliability in generating operational cash flows at POWI.

Liquidity of Power Integrations (POWI)

Leverage is declining?

Debt levels are carefully scrutinized within financial analysis for signaling potential risk.

Power Integrations (POWI) has maintained a consistent leverage ratio of 0 over the last 20 years, up to and including 2022 and 2023. This stability in leverage indicates no increase in debt levels, thereby reflecting a consistently low financial risk profile. However, since there is no change, this criterion scores 0 points in Piotroski's model.

Current Ratio is growing?

The Change in Current Ratio compares the company's liquidity position year-over-year. An increase signifies improved liquidity, indicating the company's enhanced ability to cover short-term liabilities with short-term assets. It is key in assessing financial stability.

The Current Ratio for Power Integrations (POWI) increased from 8.9947 in 2022 to 10.4692 in 2023, which is a significant improvement. This represents an increase by 16.4%. Historically, POWI's Current Ratio has fluctuated, but a rising trend is evident, surpassing the industry median considerably, which stands at 3.4213 in 2023. This increase in liquidity should be seen positively, casting a favorable light on financial health and operational efficiency, especially when compared to the industry median ratio, which has not seen significant variation in recent years. Therefore, based on Piotroski’s criteria, this would add 1 point for the increased Current Ratio.

Number of shares not diluted?

Change in Shares Outstanding measures the change in the number of shares issued by a company. It's crucial because an increase can dilute existing shareholders, while a decrease can indicate share buybacks, often a positive signal.

The Outstanding Shares for Power Integrations were 57,801,000 in 2022 and have dropped to 0 in 2023. This suggests a massive decrease rather than an increase. Over a 20-year period, the number of shares has fluctuated, mostly ranging between 57 million and 64 million shares, but never reaching 0. This drastic decrease is unusual and, in typical financial terms, it earns 1 point in the Piotroski analysis. However, this result stands out and could be a result of an anomaly or data error, given the historical consistency.

Operating of Power Integrations (POWI)

Cross Margin is growing?

The Change in Gross Margin criterion examines whether a company has improved its gross profit relative to its revenue year-over-year.

For Power Integrations (POWI), the Gross Margin in 2023 was 0.515, a decrease from 0.5635 in 2022. This represents a reduction in profitability as gross margin measures how well a company controls its costs relative to revenue. Over the last 20 years, POWI's gross margin has had fluctuations but generally remained robust. However, when compared to the industry median of 0.4919 in 2023, POWI is still above average despite the drop. This trend is negative for this criterion, so no point is added.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales revenue. A higher ratio indicates better performance.

The latest figures indicate that Power Integrations (POWI) has experienced a decrease in its Asset Turnover from 0.7022 in 2022 to 0.5356 in 2023. This downturn is not favorable as it reflects reduced efficiency in utilizing assets to generate revenue. Historical data further highlights a general decline in asset turnover over the past decades with few years of improvement. Hence, no points are awarded for this criterion in 2023.