Last update on 2024-06-07

Rambus (RMBS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

Analyzing Rambus (RMBS) Piotroski F-Score with an 8/9 score for 2023, highlighting financial health and growth metrics for investors.

Short Analysis - Piotroski Score: 8

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

Rambus (RMBS) has been analyzed based on the Piotroski F-Score, a method to assess the financial strength of a company. The score ranges from 0 to 9, with 9 indicating the strongest financial position. Rambus scored 8, which is quite strong. The company shows positive net income and cash flow, with an increasing Return on Assets (ROA). While Operating Cash Flow isn't higher than Net Income, other liquidity indicators like decreasing leverage and an increasing current ratio are positive. Efforts such as share buybacks and growing gross margins further bolster its profile. However, the company still lags behind the industry median in some areas like ROA.

Insights for Value Investors Seeking Stable Income

Based on these strengths, Rambus appears to be financially robust and generally improving. Investors might consider Rambus a good stock to explore further for potential investment. However, it's essential to delve deeper into specific areas where the company lags behind the industry median, such as Return on Assets, to get a complete view of its future potential and any underlying risks.

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

Profitability of Rambus (RMBS)

Company has a positive net income?

Net income reveals a company's profitability. A positive net income indicates profits, while a negative net income suggests losses. It's crucial in assessing financial health.

For the fiscal year 2023, Rambus (RMBS) reported a net income of $333.9 million, which is positive. Over the last 20 years, the company has fluctuated between profits and losses. Significant losses were noted in 2006, 2007, 2008, 2012, 2017, 2018, 2019, and 2021. However, the positive net income in 2023 demonstrates a significant turnaround, marking the highest profit in the period. Thus, 1 point is awarded for this criterion, indicating a favorable trend.

Company has a positive cash flow?

Evaluate the Cash Flow from Operations (CFO) for Rambus (RMBS) to determine if it is positive or negative. Positive CFO indicates that a company is generating sufficient cash from its core business activities, essential for long-term sustainability and growth.

The Cash Flow from Operations (CFO) for Rambus (RMBS) in 2023 is $195,786,000, which is positive. Over the last 20 years, the CFO generally exhibits an upward trend with occasional fluctuations. A positive CFO is a robust indicator that Rambus is efficiently generating cash from its core operations, contributing to the company's ability to reinvest, pay down debt, and potentially increase shareholder value. Notably, the company has managed to turn around after negative CFO years in 2008 and 2009. Therefore, for this criterion, Rambus earns 1 point, reflecting healthy cash flow management.

Return on Assets (ROA) are growing?

Return on Assets (ROA) indicates how efficiently a company uses its assets to generate earnings. It's crucial for assessing management's ability to generate income from company assets.

The ROA for Rambus has shown a significant improvement from -0.0127 in 2022 to 0.2941 in 2023. This increase warrants the addition of 1 point in the Piotroski analysis, reflecting positive changes in asset utilization efficiency. Contextually, this shift from negative to positive suggests a notable turnaround in company performance. However, the industry median ROA of 0.4919 in 2023 implies that while Rambus is improving, it still lags behind industry standards, indicating further room for improvement.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is an important metric because it indicates that a company's core business operations are generating more cash than its overall profitability. This suggests strong earnings quality, as net income can be influenced by non-cash items and accounting adjustments, while operating cash flow is a more direct measure of cash generated from operations.

For the year 2023, Rambus (RMBS) reported an Operating Cash Flow of $195.79 million and a Net Income of $333.90 million. This means that the Operating Cash Flow is lower than the Net Income. Based on this criterion, Rambus then gets 0 points since the Operating Cash Flow is not higher. Analyzing historical data: since 2011, it shows a growing trend in cash flow from operations, indicating improving operational efficiency. However, there have been fluctuations particularly notable is 2023 where Operating Cash Flow is significantly lower than the Net Income, implying potential concerns on earnings quality for the given year.

Liquidity of Rambus (RMBS)

Leverage is declining?

Change in leverage refers to the variation in the company's total debt to its equity capital over a period. It is crucial as it indicates the company's financial risk.

Analyzing the leverage ratios of Rambus from 2022 (0.0287) to 2023 (0.0209), we observe a decrease. Specifically, the leverage dropped by around 0.0078. This reduction indicates lower financial risk for Rambus, showcasing improved stability in managing its debt levels. Over the past 20 years, the company has seen fluctuations, with the highest leverage recorded in 2008 at 0.3451. The latest decrease is a positive sign, thus scoring 1 point in Piotroski analysis.

Current Ratio is growing?

This criterion examines the change in a company's current ratio year-over-year. An increase suggests improved liquidity.

In 2023, Rambus Inc. (RMBS) reported a Current Ratio of 7.0763, up from 4.1608 in 2022. This increase reflects enhanced short-term liquidity, as the company now has over 7 times more current assets than current liabilities. Historically, over the last 20 years, the company has consistently maintained a Current Ratio significantly above the industry median, which reported values like 2.8342 in 2022 and 3.4213 in 2023. Thus, this trend is positive for RMBS, bolstering investor confidence. As a result, we add 1 point for this criterion.

Number of shares not diluted?

A decrease in the number of outstanding shares is often viewed as positive because it indicates that the company is buying back its own stock. This can signal that the company believes its stock is undervalued.

In 2023, Rambus' outstanding shares stood at 108,183,000, down from 109,472,000 in 2022. This indicates a decrease in the number of shares by 1,289,000 year-over-year. Historically, this trend of share buybacks is seen positively as it might signal management's confidence in undervaluation or aim to improve financial ratios. Over the past two decades, the number of outstanding shares has fluctuated, peaking at 117,624,000 in 2014. Thus, for 2023, one point is added in the Piotroski score, reflecting a favorable trend for shareholders.

Operating of Rambus (RMBS)

Cross Margin is growing?

Change in Gross Margin measures a company's efficiency and pricing strategy. A positive trend is a strong signal for profitability.

In 2022, Rambus (RMBS) posted a gross margin of 0.7635 which increased to 0.7757 in 2023. An increase in gross margin generally signals improved production efficiency and/or better pricing strategies. This upward trend is particularly encouraging when juxtaposed with the industry median, which was 0.4909 in 2023. Not only has Rambus demonstrated an increase in its gross margin, but it also outperforms the industry median significantly. Given this data, Rambus scores a point for this criterion.

Asset Turnover Ratio is growing?

Asset turnover measures a firm's efficiency in using its assets to generate sales. It is calculated by dividing sales by total assets.

In 2023, Rambus (RMBS) recorded an asset turnover of 0.4061, slightly up from 0.4051 in 2022. This uptick signifies a mild improvement in the company’s efficiency in utilizing assets to create revenue. While the increase is minimal, any upward trend is typically seen as positive, reflecting improved management effectiveness. Over a 20-year trend, the company's asset turnover ratio has seen fluctuations, with a notable dip in 2018 (0.2053) and gradual recovery towards 2023. Given the historical context, the continuous rise post-2018 recovery suggests an ongoing rebound. Hence, a point is awarded.