Last update on 2024-06-07

Radware (RDWR) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

Radware's Piotroski F-Score of 4/9 in 2023 reveals weaknesses in profitability and cash flow, despite improvements in leverage and liquidity.

Short Analysis - Piotroski Score: 4

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

The Piotroski F-Score for Radware (RDWR) is 4 out of 9, indicating a moderate financial position. The company exhibits strengths in liquidity and capital management but shows weaknesses in profitability and operational efficiency. Radware's declining profitability, negative cash flow from operations, and deteriorating ROA signal financial challenges. The company's leverage and liquidity have improved, and there is no share dilution, which are positive indicators. However, a decline in gross margin and asset turnover highlights operational inefficiencies.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score, Radware (RDWR) may be a risky investment due to several financial challenges, including negative profitability and cash flow concerns. While there are some positive signs like better liquidity and non-dilution of shares, the overall analysis suggests caution. As an investor, it might be worth researching the reasons behind the negative trends and considering other stocks with stronger financial health.

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

Profitability of Radware (RDWR)

Company has a positive net income?

Net income is a crucial indicator of a company's profitability, reflecting the profit or loss after all expenses and taxes, shaping investment attractiveness and financial health assessments.

Radware's net income for 2023 stands at -$21,590,000, marking a significant downturn compared to previous years. For a historical context, the net income trends over the past 20 years show considerable fluctuations, with profitability in some years and substantial losses in others. The latest negative net income denotes a deterioration in financial performance, thus earning a score of 0 in this Piotroski criterion. This negative trend raises concerns about the company's ability to generate profits consistently.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates a company's ability to generate sufficient positive cash flow to maintain and grow operations, which is critical for long-term sustainability.

In 2023, Radware (RDWR) reported a CFO of -$3,500,000, reflecting a significant contraction relative to most of the previous years. This is notably concerning, as it is the only negative CFO since 2007. The CFO has generally demonstrated a positive trend, reaching a peak of $71,774,000 in 2021. A negative CFO can indicate problems in core business operations or potential cash constraints. The trend shift in 2023 is undoubtedly negative, earning a score of 0 in the Piotroski Analysis for this criterion.

Return on Assets (ROA) are growing?

The Change in Return on Assets (ROA) criterion measures the company's ability to generate profits from its assets compared to the previous year. If the ROA has increased, it indicates improved profitability and efficient use of assets.

The ROA for Radware (RDWR) in 2023 was -0.0355, compared to -0.0003 in 2022. Hence, the ROA has decreased (becoming more negative). This suggests that Radware's profitability relative to its assets has worsened. When comparing this to the industry median ROA, which consistently outperforms Radware's ROA, it signals potential inefficiencies in asset utilization or other operational challenges. This downward trend in ROA results in 0 points for this criterion in the Piotroski analysis.

Operating Cashflow are higher than Netincome?

Compare the Operating Cash Flow with the Net Income of Radware (RDWR). If the Operating Cash Flow is higher than Net Income, it signals stronger cash generation ability and adds 1 point in Piotroski Analysis.

For 2023, Radware's Operating Cash Flow stands at -3,500,000, while its Net Income is -21,590,000. Clearly, the operating cash flow is higher than net income. This comparison suggests that despite negative figures, the company's cash generation from its core operations is on relatively better footing compared to its accounting income. Adding 1 point indicates a positive signal in the Piotroski analysis for cash generation. Historically, Radware has seen considerable variances in its operating cash flow, peaking at 71,774,000 in 2021 and now showing a downturn, aligning similarly with net income trends fluctuating from positive to negative values.

Liquidity of Radware (RDWR)

Leverage is declining?

Change in leverage evaluates the change in the ratio of total debt to equity, comparing the current year's leverage ratio to the previous year's.

For Radware (RDWR), the leverage ratio decreased from 0.0302 in 2022 to 0.028 in 2023. This trend is considered positive in the context of the Piotroski analysis as it reduces financial risk, making the company more stable. Over the past 5 years, RDWR's leverage has generally been stable. Thus, for this criterion, Radware earns 1 point.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets. It is crucial as it indicates financial health.

In 2023, Radware (RDWR) reported a Current Ratio of 2.4251, up from 2.0387 in 2022, an increase by 0.3864 points. This improvement points to an enhanced ability to cover short-term liabilities with current assets, which is advantageous. Over the past 20 years, Radware's Current Ratio has frequently surpassed the industry median, which stood at 1.5348 in 2023. Compared to the median, Radware's ratio indicates robust liquidity. Therefore, 1 point is awarded, marking this trend as favorable.

Number of shares not diluted?

Change in Shares Outstanding is crucial as it informs about potential dilution or concentration of stock, impacting stockholder value.

Between 2022 and 2023, Radware (RDWR) saw its outstanding shares decrease from 44,943,168 to 42,871,770. This reduction of approximately 4.6% could imply fewer new shares were issued, potentially indicating better capital management and non-dilutive financing decisions. This is a positive sign, earning a score of 1 in this criterion.

Operating of Radware (RDWR)

Cross Margin is growing?

Gross Margin, a critical measure of a company's financial health, reveals the percentage of revenue exceeding the cost of goods sold, indicating profitability and pricing strategies.

Comparing the Gross Margin values for Radware (RDWR) in 2023 and 2022, we observe a decrease from 0.8164 in 2022 to 0.8021 in 2023. This reduction of approximately 1.75 percentage points (0.8164 - 0.8021) illustrates a slight decline in the company's profitability from its core operational activities. Over the past two decades, Radware's Gross Margin had demonstrated stable performance, normally staying above the industry median. However, the most recent figures suggest a trend that has now decreased. This puts the point at 0 as the Gross Margin hasn't increased in 2023.

Asset Turnover Ratio is growing?

Compare the Asset Turnover ratio for Radware (RDWR) between 2023 and 2022 to determine if there is an improvement. An increased ratio indicates efficient use of assets to generate sales, thus scoring higher.

The Asset Turnover for Radware (RDWR) in 2023 is 0.4299, which is lower than the 0.4589 in 2022. This decline signifies that the company was less efficient in utilizing its assets to generate sales revenue in 2023 compared to 2022. Over the past 20 years, the Asset Turnover Ratio has shown a fluctuating trend. For instance, the highest ratio reached was 0.6139 in 2010, while the lowest was 0.3639 in 2003. This pattern suggests varying operational efficiency, likely influenced by changes in market conditions, corporate strategies, or capital investments. Given the numerical evidence from 2022 and 2023, the score for this criterion is 0, reflecting a decrease in Asset Turnover.