Last update on 2024-06-07

Resources Connection (RGP) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Detailed Piotroski F-Score analysis for Resources Connection (RGP) in 2023, scoring 6 out of 9. Strong in profitability and liquidity with positive cash flow.

Short Analysis - Piotroski Score: 6

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

Resources Connection (RGP) has been evaluated using the Piotroski F-Score, which measures the strength of a company's financial position based on nine criteria related to profitability, liquidity, and efficiency. RGP scored a 6 out of 9. For profitability, RGP shows positive net income and cash flow from operations, but its ROA decreased, showing less efficiency in asset usage. For liquidity, RGP has higher operating cash flow than net income and an increasing current ratio, indicating good short-term financial health, but it scored low on leverage due to rising debt and share dilution. For operating efficiency, its gross margin improved, but its asset turnover declined, indicating less effective use of assets to generate sales.

Insights for Value Investors Seeking Stable Income

Despite scoring a 6 on the Piotroski F-Score, which is relatively strong, there are mixed signals from the detailed analysis. The consistent positive net income, high cash flow from operations, and improving current ratio are positives. However, the decline in ROA, increasing leverage, share dilution, and declining asset turnover ratio are areas of concern. If you're considering investing in RGP, it's worth looking into these issues further and considering how they align with your investment goals and risk tolerance.

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

Profitability of Resources Connection (RGP)

Company has a positive net income?

Net income is a key indicator of a company's profitability, showing the total amount of money a company has earned or lost over a specific period, typically a fiscal year.

Resources Connection (RGP) reported a net income of $54,359,000 in 2023. This positive net income continues a trend of profitability over the last several years, with the company consistently showing positive net income since 2014. This demonstrates a solid and stable business performance, contributing an additional 1 point to the Piotroski score for maintaining positive net income. This trend is good as it reflects the company's ability to generate profit consistently.

Company has a positive cash flow?

Cash flow from operations (CFO) is the amount of cash a company generates from its regular business operations.

The Cash Flow from Operations (CFO) for Resources Connection (RGP) in 2023 stands at a positive $81.636 million, earning it 1 point on the Piotroski F-Score. Reviewing the last 20 years of CFO data (2007 to 2023), this represents the highest figure recorded, which indicates robust operating performance and significant cash generation from core business activities. Remarkably, CFO figures improved from 2013 onwards, culminating in this record-setting number in 2023. Hence, this upward trend is commendable, signaling sound financial health.

Return on Assets (ROA) are growing?

ROA reflects how efficiently a company uses its assets to generate profit. A higher ROA indicates improved efficiency.

ROA for Resources Connection (RGP) decreased from 0.1219 in 2022 to 0.0976 in 2023, implying that the company's efficiency in using its assets to generate profits has deteriorated. This ROA trend is concerning because while RGP's ROA declines, the industry median remains significantly higher at 0.5565 in 2023. As a result, RGP scores 0 points in this criterion.

Operating Cashflow are higher than Netincome?

The criterion compares Operating Cash Flow with Net Income, rewarding a point if Operating Cash Flow is higher. It's vital as it shows quality of earnings and cash generation ability.

In 2023, Resources Connection (RGP) shows an Operating Cash Flow of $81,636,000 compared to a Net Income of $54,359,000. Thus, the Operating Cash Flow is higher by $27,277,000, adding 1 point under this metric. Examining past performance, cash flow from operations has seen substantial growth, especially when compared with Net Income, indicating robust internal cash-generating ability, which positively reflects on earnings quality. This trend is good as it demonstrates that RGP is efficient in generating cash from its core operations, which is essential for ongoing liquidity and operational stability.

Liquidity of Resources Connection (RGP)

Leverage is declining?

Change in Leverage compares the company's financial leverage over consecutive years. It's important to assess because a decrease may indicate a reduced level of financial risk.

Comparing Resources Connection's leverage, it has increased from 0.0193 in 2023 to 0.1158 in 2022. This indicates a negative trend, giving 0 points for this criterion. Historically, from 2007 to 2023, noteworthy fluctuations are present, with leverage peaking at 0.2243 in 2020 before dropping significantly by 2023. The leveraged positions were stable during 2014-2017, but recent substantial fluctuations suggest some level of financial risk.

Current Ratio is growing?

A decrease in the Current Ratio is often viewed negatively, as it suggests that a company may have difficulty meeting short-term obligations. Conversely, an increase indicates that the company's liquidity position has improved.

The Current Ratio for 2023 is 2.72, whereas for 2022 it was 2.4818. This represents an increase in the Current Ratio. Over the past 20 years, RGP's Current Ratio has generally been well above the industry median, often by significant margins. Specifically, the Current Ratio has ranged from a high of 3.2372 in 2014 to a low of 2.0617 in 2018. The consistency of maintaining a higher ratio compared to the industry median, which peaked at 1.7822 in 2012 and fell as low as 1.1927 in 2009, underscores RGP’s stronger short-term financial health. Therefore, Resources Connection earns a point in the Piotroski Analysis for an increase in its Current Ratio from 2022 to 2023.

Number of shares not diluted?

Change in Shares Outstanding measures how much the number of outstanding shares has changed. A decrease is favorable as it indicates the company may be buying back shares.

Resources Connection (RGP) experienced an increase in outstanding shares from 32,953,000 in 2022 to 33,407,000 in 2023. This increase is generally seen as unfavorable for this particular criterion, as it implies the dilution of existing shares rather than a potential increase in shareholder value through buybacks. Historically, RGP's performance with respect to shares outstanding shows consistency, mainly holding steady at approximately 33,407,000 shares over several previous years, except for the few anomalous years where the number fluctuated significantly around 2017 (29,662,000) and 2018 (31,614,000). This overall upward trend in outstanding shares does not add a point in the Piotroski score, which typically rewards share reductions indicative of strategic capital management. Therefore, RGP scores 0 for this criterion.

Operating of Resources Connection (RGP)

Cross Margin is growing?

The Change in Gross Margin criterion examines whether a company’s profit margins have improved or declined. It is key for identifying companies improving their operational performance.

The Gross Margin for Resources Connection (RGP) increased from 0.3933 in 2022 to 0.4037 in 2023, resulting in a 1 point addition. This positive trend indicates effective cost management and enhanced operational efficiency. Historically, the company's Gross Margin has shown a consistent upward trajectory over the last few years, rising from 0.3805 in 2014 to 0.4037 in 2023. While RGP's Gross Margin still falls short when compared to the industry's median, which was 0.5565 in 2023, the company is making steady progress.

Asset Turnover Ratio is growing?

Change in Asset Turnover compares the sales generated per unit of asset. It's crucial for understanding how effectively a company utilizes its assets to generate sales.

The Asset Turnover for Resources Connection (RGP) was 1.3932 in 2023, compared to 1.4609 in 2022. This indicates a decline in Asset Turnover by approximately 4.6%. Over the last two decades, the ratio showed its strength in 2019 with 1.6933 and its significant drop in 2021 with 1.1993. This downward trend in the latest year sets the score to 0, highlighting a need for improvements in using assets to generate sales more efficiently.