Last update on 2024-06-05

PPL (PPL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

PPL (PPL) Piotroski F-Score 2023: Final Score 5/9. Comprehensive financial analysis of profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score evaluates the financial strength of companies based on nine criteria: profitability, liquidity, and operating efficiency. The score ranges from 0 to 9, and a higher score implies stronger financial health. PPL Corporation received a score of 5, which is moderate. Here's the breakdown: **Profitability:** - Positive net income: Yes (+1 point) - Positive cash flow: Yes (+1 point) - Return on Assets (ROA): No decrease (-0) - Operating cash flow higher than net income: Yes (+1 point) **Liquidity:** - Decreasing leverage: No (-0) - Growing current ratio: Unspecified, likely no change or decrease. - No share dilution: No (-0) **Operating Efficiency:** - Growing gross margin: Yes (+1 point) - Growing asset turnover ratio: No (-0) **Net Result: 5 (out of 9)**

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 5, PPL Corporation shows moderate financial health. Some positive signs like consistent net income, positive cash flow from operations, and growing gross margin are encouraging. However, concerns include increasing leverage, share dilution, and declining return on assets and asset turnover ratio. Overall, a score of 5 suggests that PPL is neither very strong nor very weak financially. It may be worth deeper analysis if you seek investments with stable cash flows, but it's essential to consider the areas needing improvement such as leverage and asset management before making any investment decisions.

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

Profitability of PPL (PPL)

Company has a positive net income?

Net income is the total profit of a company after taxes and expenses. It shows the company's profitability.

Interpreting PPL's net income of $740 million in 2023 is important for evaluating its profitability. The net income is indeed positive, thus adding 1 Piotroski point. Comparing historical data: In 2021, net income was $756 million while 2020 shows $1.469 billion. The consistency in positive net income, barring a substantial loss of $1.48 billion in 2020, suggests resilience. Despite recent profitability, the dip compared to previous years signals room for improvement.

Company has a positive cash flow?

The criterion evaluates whether the cash flow from operations (CFO) for the year is positive, indicating that the company is generating more cash than it is spending, fundamental for long-term viability.

The Cash Flow from Operations (CFO) for PPL in 2023 stands at 1,758,000,000, indicating a positive cash flow. Historically, the company has managed to maintain positive CFO each year over the last two decades. This consistency reveals a robust cash-generating capability. Although there was a decline to $1,730,000,000 in 2022 from the high of $3,403,000,000 in 2014, the figure bounced back to $1,758,000,000 in 2023. This trend is favorable as continuous positive cash flow is crucial for meeting the company's operational needs and funding capital expenditures which add value to shareholders.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) is a key profitability ratio, indicating how efficiently a company can convert the money it invests in assets into net income. An increase would be a positive sign, demonstrating improved operational efficiency.

Between 2022 and 2023, PPL's ROA decreased from 0.0213 to 0.0192. This indicates a decline in the company's efficiency in converting its assets into net income. As a result, the criteria would not add 1 point but rather 0. Given the long-term trend, we can observe fluctuating ROA figures with several peaks and troughs. Note that PPL's ROA has persistently been significantly lower than the industry median, suggesting challenges in operational performance relative to its peers.

Operating Cashflow are higher than Netincome?

Operating cash flow higher than net income is a criterion that indicates the company's cash generation capabilities. If operating cash flow is consistently higher, it suggests solid cash earnings.

For the year 2023, PPL Corp's operating cash flow stood at $1,758 million, whereas its net income was $740 million. Since the operating cash flow is significantly higher than the net income, this condition is met, yielding a score of 1. Historically speaking, PPL has shown a robust trend where operational cash flows frequently surpassed net income, reaffirming the company's strong cash generation capabilities. This is significant as it indicates that the company's earnings are backed by actual cash inflows rather than accounting adjustments or accruals. A strong operational cash flow relative to net income offers greater financial stability and flexibility for the company to reinvest in growth, pay down debt, or return value to shareholders.

Liquidity of PPL (PPL)

Leverage is declining?

Change in leverage: comparison of one year's leverage ratio to the previous year's ratio and its importance.

In 2022, PPL's leverage was 0.3406, increasing to 0.3724 in 2023. According to the Piotroski Analysis, increased leverage is a negative indicator, resulting in 0 points for this criterion. This gradual increase could indicate rising financial obligations, which may affect financial flexibility.

Current Ratio is growing?

Explain the criterion for PPL (PPL) and why it is important to consider

The Current Ratio is a measure of a company's ability to pay short-term obligations with its short-term assets. A higher current ratio indicates a stronger liquidity position.

Number of shares not diluted?

Change in shares outstanding refers to the alteration in the number of a company's issued shares over a specific period. It serves as an indicator of buybacks or new share issuances.

In 2022, PPL Corporation (PPL) had 736,027,000 shares outstanding. This number increased to 737,036,000 shares in 2023. The increase in outstanding shares generally indicates that the company has issued additional shares, which could be due to raising capital for expansion, financing operations, or other strategic financial decisions. Based on the Piotroski criteria, an increase in shares outstanding results in a score of 0 for this factor, as investor dilution is typically seen unfavorably. Over the last 20 years, there has been a significant increase in the number of shares, growing from 346,226,415 in 2003 to 737,036,000 in 2023. This trend points to a consistent approach to raising capital through equity, which investors should consider when evaluating the company's financial strategies and their impacts on shareholder value.

Operating of PPL (PPL)

Cross Margin is growing?

Gross Margin represents the company's operational efficiency, showing how much profit is made after subtracting production costs.

PPL's Gross Margin increased from 0.3654 in 2022 to 0.3941 in 2023, showing improved operational efficiency. The long-term trend reveals a fluctuating Gross Margin, hitting a peak of 0.7498 in 2007 and a bottom of 0.2787 in 2009. Although the increase is positive, PPL's current Gross Margin lags the Industry Median of 0.4109 in 2023. Given that the Gross Margin has improved over the year 2023, this criterion scores 1 point.

Asset Turnover Ratio is growing?

Asset Turnover Ratio

When you compare the Asset Turnover Ratio of PPL Corporation (PPL) between 2023 (.2157) and 2022 (.2224), it is clear that the ratio has decreased. This results in a score of 0 for this criterion. Notably, the asset turnover ratio has shown variability over the last twenty years—peaking at 0.3888 in 2008 and dipping as low as 0.1167 in 2020. Although there has been some recovery since the low in 2020, the recent decrease from 2022 to 2023 signals potential inefficiencies in utilizing asset base, warranting attention from investors.