Last update on 2024-06-07

Royal Gold (RGLD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

Royal Gold (RGLD) receives Piotroski F-Score of 5/9 in 2023, reflecting mixed financial health indicators. Read detailed analysis on profitability and liquidity.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score for Royal Gold (RGLD) is 5 out of 9. This score evaluates the company's financial strength based on profitability, liquidity, and efficiency. The detailed analysis covers 9 criteria, including positive net income, cash flow from operations, return on assets, and leverage, among others. Royal Gold has positive net income and operational cash flow, both showing steady improvements. However, the company faces challenges with declining ROA and Current Ratio, and a slight increase in share dilution. The Gross Margin has improved over the past year, but the Asset Turnover Ratio has declined, indicating a potential short-term inefficiency.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 5, Royal Gold (RGLD) demonstrates a mixed financial position. While the company shows strong profitability and operational cash flow, the declining ROA, Current Ratio, and recent share dilution are concerns. Given the improved Gross Margin, it's worth investigating Royal Gold further, especially focusing on its long-term trends in efficiency and liquidity. For potential investors, this stock may be moderately appealing, but it would be prudent to conduct a deeper analysis considering the flagged concerns.

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

Profitability of Royal Gold (RGLD)

Company has a positive net income?

This criterion checks if Royal Gold's net income for 2023 is positive, indicating profitability.

Royal Gold (RGLD) has reported a net income of $239.44 million in 2023, which is a positive figure. Over the past 20 years, the company's net income has shown variability, with significant fluctuations. Noteworthy years include 2017 and 2019, where the company saw negative net income of -$77.15 million and -$113.13 million, respectively. The consistent recovery and reporting of positive net income for the third consecutive year, peaking at $302.53 million in 2021, reflects a strong financial position. This positive trend in net income is considered favorable and consequently earns Royal Gold 1 point for this criterion.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the cash generated by a company's regular business operations. Positive CFO signifies strong operational performance.

Royal Gold (RGLD) has a CFO of $415,792,000 in 2023, which is positive. This positive trend yields 1 point in the Piotroski Analysis. Reviewing the operating cash flow over the last 20 years, a consistent upward trend is observed, with values starting at $11,684,089 in 2003 and steadily increasing to $415,792,000 in 2023. This persistent improvement underscores robust operational efficacy and financial health, suggesting a strong capability to fund business operations without external finances. Such a trend is beneficial, indicating sound management and profitability.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) is important as it indicates the company’s ability to generate profit from its assets. A rising ROA suggests improved efficiency.

For Royal Gold (RGLD), the ROA in 2023 was 0.0694 compared to 0.0773 in 2022. This indicates a decrease in ROA, therefore we set the point to 0. Generally, a rising ROA is desirable as it showcases the company’s improved ability to generate profit from assets. Historical data reveals fluctuating ROA values, with the industry median significantly higher, declining from 0.3576 in 2003 to 0.2884 in 2023. Despite favorable operating cash flows, Royal Gold's comparatively lower and declining ROA may be a concern.

Operating Cashflow are higher than Netincome?

Cash flow from operations (CFO) measures the cash a company generates from its core business operations. This metric is crucial as it shows the company's ability to generate sufficient cash to maintain or expand operations without the need for external financing or investments.

For Royal Gold (RGLD), the operating cash flow in 2023 is $415,792,000, significantly higher than the net income of $239,440,000. This trend is positive for the company as it indicates strong cash generation from core business activities. A higher CFO compared to net income suggests that the earnings are backed by cash, alleviating concerns about earnings quality or aggressive accounting practices. Evaluating the historical data, Royal Gold has consistently shown increasing operating cash flow over the last 20 years, emphasizing strong and stable cash-generating capabilities. This gains 1 point in Piotroski's analysis, indicating financial health.

Liquidity of Royal Gold (RGLD)

Leverage is declining?

Leverage measures the company's debt relative to its equity. Lower leverage indicates less risk and better financial health.

In 2022, Royal Gold had a leverage ratio of 0.1617, which decreased significantly to 0.0732 in 2023. This indicates a substantial reduction in debt relative to equity over one year. Over the past 20 years, Royal Gold's leverage has fluctuated, peaking at 0.1959 in 2016 and reaching a historical low of 0 in several years. The 2023 leverage is one of the lowest points, emphasizing improved financial stability. Therefore, Royal Gold scores a point in the Piotroski analysis for the reduction in leverage.

Current Ratio is growing?

The Current Ratio is a measure of a company's ability to pay its short-term obligations with its short-term assets. A higher ratio is generally more desirable as it indicates better liquidity.

Royal Gold's Current Ratio decreased from 2.9225 in 2022 to 2.3118 in 2023, indicating a drop in liquidity. Although the current ratio is still above 2, showing that Royal Gold can cover its current liabilities with current assets, this downward trend is concerning. Historically, Royal Gold had a significantly higher ratio, peaking in 2009 at 51.4959. Compared to the industry median, which was 2.6292 in 2023, Royal Gold's ratio is slightly lower, signaling relatively weaker liquidity. Therefore, this criterion scores 0 points, reflecting a decline in financial health.

Number of shares not diluted?

Change in Shares Outstanding is a crucial indicator as it shows company dilution or buybacks, affecting Earnings Per Share.

The Outstanding Shares have increased from 65,576,995 in 2022 to 65,613,002 in 2023. This indicates an issuance of additional shares, thus setting the point to 0. Historically, Royal Gold's share count has exhibited growth from 20,231,638 in 2003 to the current 65,613,002 in 2023, reflective of a broad trend of issuing more shares over time. Such trends dilute existing shareholders' equity, potentially watering down EPS. Therefore, this additional issuance suggests a negative trend.

Operating of Royal Gold (RGLD)

Cross Margin is growing?

Gross Margin evaluates a company's manufacturing and distribution efficiency during the production process. A higher gross margin indicates that a company keeps more capital, which it can then reinvest into other business operations.

In 2023, Royal Gold's Gross Margin stood at 0.5662, an increase from the 0.5348 recorded in 2022. This positive trend adds 1 point to the Piotroski score, as an increasing Gross Margin is a favorable indicator for the company's operational efficiency and profitability. Looking at the historical trend, Royal Gold has consistently maintained a Gross Margin significantly higher than the industry median. For example, in 2023, the industry median gross margin was just 0.2884, compared to Royal Gold's 0.5662. This clearly sets Royal Gold apart as a strong performer in its sector.While the Gross Margin was at an impressive 0.9688 in 2013, it has been notable that since 2016, the company had seen a dip until a strong improvement post-2019.For example,the gross margin of 0.4216 in 2019 has gradually increased over the years.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in generating revenue from its assets.

Comparing Asset Turnover for Royal Gold (RGLD) in 2023, which is 0.1757, with 2022's value of 0.195 reveals a decrease. This is not an apo panel quality inherent positive indicator as it suggests the company's efficiency in adding value through its existing market resources has declined. Over the past 20 years, RGLD's Asset Turnover shows a volatile trend but has generally improved from its lowest point of 0.0818 in 2014 to a peak of 0.2273 in 2021. However, the recent drop suggests that the company has hit a short-term inefficiency phase, marking a red flag. For this criterion, add 0 points.