Last update on 2024-06-06

Quanta Services (PWR) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Assess the Piotroski F-Score of Quanta Services (PWR) in 2023 with a score of 6/9. Learn about profitability, liquidity, and operational efficiency metrics.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score evaluates companies out of 9 based on profitability, liquidity, and efficiency. Quanta Services (PWR) has a score of 6 out of 9. The company's strengths include positive net income, cash flow from operations, and increasing return on assets (ROA). Additionally, operating cash flow is higher than net income, indicating solid earnings quality, and the asset turnover ratio is growing. However, the company's weaknesses are reflected in increasing leverage, decreasing current ratio, new share dilution, and declining gross margin.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 6, Quanta Services shows strong profitability and operational efficiency but has some areas of financial risk like higher debt levels and lower liquidity. Investors who value earnings quality and efficient asset management may find Quanta Services promising, though they should be cautious about the firm's financial stability. Thus, it's a potential investment but requires careful watching of leverage and liquidity.

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

Profitability of Quanta Services (PWR)

Company has a positive net income?

Net income reflects the company's profitability after all expenses and taxes have been subtracted from total revenue.

In 2023, Quanta Services achieved a net income of $744,689,000, which is a positive figure. This indicates solid profitability for the company. Over the past 20 years, the net income has shown considerable improvement, having moved from negative figures in the early 2000s to consistent profitability over the last two decades. Particularly, the net income has more than doubled since 2003 and has consistently stayed positive since 2005. Therefore, for the criterion of net income in the Piotroski score, Quanta Services earns 1 point for its positive net income in 2023.

Company has a positive cash flow?

Cash flow from operations (CFO) is a measure of the amount of cash generated by a company's regular operating activities, excluding financing or investment flows.

Quanta Services (PWR) has a positive CFO of $1,575,952,000 in 2023. This is a positive trend as positive CFO indicates that the company is generating sufficient cash from its core business operations to cover its operating expenses and potentially reinvest in the business. Notably, this CFO is also the highest in the last 20 years, evidencing a significant upward trajectory compared to previous years, such as $113,031,200 in 2022 and lower amounts in earlier years. Therefore, Quanta Services' cash flow from operations is strong and consistent, reflecting effective operational management and financial health.

Return on Assets (ROA) are growing?

Assess the change in Return on Assets (ROA). ROA, which measures a company's ability to generate profit from its assets, is a significant profitability ratio. An increase typically indicates better management efficiency in using assets to generate earnings.

Quanta Services' ROA increased from 0.0373 in 2022 to 0.0501 in 2023, resulting in a 1 point score for this criterion. This represents a positive trend, showing that Quanta Services is utilizing its assets more effectively to generate profits. While the company's ROA is improving, it remains below the industry's median ROA of 0.2389 for 2023, suggesting room for further enhancement. Historical data shows fluctuations in operating cash flow, which rebounded robustly from $582.39 million in 2021 to $1.57 billion in 2023, indicating potential underlying strength and efficiency improvements in asset usage.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income measures the quality of earnings by examining whether a company's operating cash flow exceeds its net income. This shows the company's ability to generate cash from its core operations and reduces the impact of non-cash items on earnings.

For the year 2023, Quanta Services reported an Operating Cash Flow of $1,575,952,000, significantly higher than its Net Income of $744,689,000. This disparity is a positive indicator, suggesting that the company's earnings are backed by substantial cash flow, thus adding 1 point in the Piotroski Analysis. Over the past 20 years, Quanta Services has shown a steady improvement in operating cash flow, particularly from 2016 to 2023, indicating robust operational health. The current cash-to-net-income ratio of approximately 2.11 underscores a strong capability to generate cash, outweighing non-cash earnings impacts, and hence is a favorable trend contributing positively to the company's financial analysis.

Liquidity of Quanta Services (PWR)

Leverage is declining?

Change in Leverage compares a company's current leverage ratio against the previous year to gauge financial stability.

The leverage ratio for Quanta Services increased from 0.2371 in 2022 to 0.287 in 2023. This implies a higher proportion of debt financing in its capital structure, indicating increased financial risk. A look at historical data shows that the company's leverage has been relatively variable over the years, peaking at 0.3413 in 2003 and almost hitting zero in 2010. Consequently, this does not favorably contribute to the Piotroski score, marking a 0 out of 1 for the year 2023.

Current Ratio is growing?

The Current Ratio is calculated by dividing a company's current assets by its current liabilities. This ratio measures a company's ability to pay short-term obligations and is critical for assessing liquidity and financial health.

Upon analysis, Quanta Services (PWR) demonstrates a decrease in the Current Ratio from 1.6253 in 2022 to 1.4726 in 2023. This indicates that the company's ability to cover short-term liabilities with short-term assets has weakened over the past year. Historically, Quanta Services has experienced fluctuations in its Current Ratio, peaking at 3.3908 in 2003. Comparatively, the industry's median current ratio has remained relatively steady, usually oscillating around 1.3-1.5 over the last two decades. While Quanta Services’ current ratio in 2023 is above the industry median of 1.2511, the downward trend this past year suggests tightening liquidity, which could be a point of concern for investors. Consequently, under Piotroski’s criteria, the score for the Current Ratio will not receive the 1 point attributed to an increase—instead, it will be marked as 0.

Number of shares not diluted?

Change in Shares Outstanding gauges how the equity base of Quanta Services has varied over the given period, impacting shareholder value.

The 2023 data reveals an increase in Outstanding Shares to 145,222,000 compared to the 143,488,000 in 2022, marking a net rise of 1,734,000 shares. Over two decades, the number of shares has seen considerable fluctuations, notably peaking in 2014 at around 219.69 million and reaching a significant dip in 2021 at approximately 140.82 million. This upward trend could dilute existing shares' value, failing to earn a point in the Piotroski analysis since it suggests potential shareholder value dilution.

Operating of Quanta Services (PWR)

Cross Margin is growing?

Gross Margin measures the proportion of revenue that exceeds the cost of production. A higher Gross Margin indicates better efficiency and profitability.

Quanta Services (PWR) experienced a decrease in Gross Margin from 0.1481 in 2022 to 0.1407 in 2023. This implies a reduction in profitability and operational efficiency, granting 0 points for this criterion. Additionally, when compared to the industry median which stands at 0.2389 in 2023, Quanta's margin lags considerably, suggesting room for improvement.

Asset Turnover Ratio is growing?

Asset Turnover evaluates how efficiently a company is utilizing its assets to generate revenue. It's calculated as revenue divided by assets.

In 2023, Quanta Services (PWR) recorded an Asset Turnover ratio of 1.4061 compared to 1.2974 in 2022, signifying an increase. This improvement in the Asset Turnover indicates that PWR is using its assets more efficiently to generate sales. Historically, examining the last two decades, PWR has demonstrated a fluctuating yet generally improving trend in asset turnover. Given this positive trajectory, the increase in Asset Turnover for 2023 contributes positively to the Piotroski score, adding 1 point for this criterion. This trend is reassuring for investors, signaling a proficient management strategy in asset utilization.