Last update on 2024-06-07

Roivant Sciences (ROIV) - Piotroski F-Score Analysis for Year 2023 (Final Score: 2/9)

Analyzing Roivant Sciences' (ROIV) financial strength using the Piotroski F-Score in 2023 reveals an overall score of 2/9, highlighting significant financial challenges.

Short Analysis - Piotroski Score: 2

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

The Piotroski F-Score for Roivant Sciences (ROIV) is 2 out of 9, based on their financial performance in 2023. Here's a breakdown of how the company fared according to the Piotroski criteria: Profitability: ROIV scored very poorly here with a negative net income of -$1,009,030,000 and a negative cash flow from operations of -$843,393,000. Return on Assets (ROA) also declined, reflecting challenges in achieving consistent profitability. Liquidity: ROIV's current ratio decreased from 11.6427 in 2022 to 6.6016 in 2023, indicating deteriorating short-term liquidity. Additionally, leverage increased significantly, indicating rising financial risk. Operating Efficiency: Although the Gross Margin decreased, ROIV saw a slight improvement in Asset Turnover ratio, indicating better efficiency in generating revenue from its assets.

Insights for Value Investors Seeking Stable Income

Given the low Piotroski F-Score of 2 out of 9 for Roivant Sciences (ROIV), it suggests the company is financially weak with significant profitability, liquidity, and operational efficiency issues. Investors looking for fundamentally strong and undervalued stocks should be cautious with ROIV. It's recommended to look for other investment opportunities unless they thoroughly understand and believe in Roivant's long-term strategy and potential for turnaround.

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

Profitability of Roivant Sciences (ROIV)

Company has a positive net income?

The criterion examines whether Roivant Sciences' net income is positive, which signals profitability. A positive net income indicates a company is generating more revenue than expenses, crucial for long-term viability and investor confidence.

The net income for Roivant Sciences (ROIV) in 2023 is -$1,009,030,000, which is negative. Therefore, for the Piotroski Analysis criterion, this does not meet the requirement, and the score will be 0 points for this criterion. When evaluating the historical data, Roivant has had fluctuating net income with years of negative net income in 2019, 2021, 2022, and 2023, except for a positive net income in 2020 ($1,200,509,000). Overall, the trend shows significant volatility with a current downturn, indicating underlying challenges in achieving consistent profitability.

Company has a positive cash flow?

The Cash Flow from Operations (CFO) for Roivant Sciences in 2023 needs to be evaluated. This is a crucial criterion as it measures the cash that a company generates or uses from its regular business operations.

In 2023, Roivant Sciences reported a Cash Flow from Operations (CFO) of -$843,393,000, which is negative. According to the Piotroski score criteria, when the CFO is negative, the company receives 0 points for this factor. Examining the last five years of data, CFO figures show a negative trend consistently: 2019: -$1,023,502,000 2020: -$758,750,000 2021: -$552,138,000 2022: -$677,729,000 2023: -$843,393,000. While this upward fluctuation portrays a larger cash outflow from operations recently, it's essential to consider Roivant's strategies and investments. However, from a traditional Piotroski perspective, this is certainly negative.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) assesses a company's ability to improve its profitability relative to its total assets year over year, indicating operational efficiency and profitability trends.

Roivant Sciences' ROA has decreased from -0.3267 in 2022 to -0.4057 in 2023, reflecting a deterioration in asset efficiency. This decline is troubling as it suggests that the company is generating less profit, further deviating from the industry median ROA of 0.4518 for 2023. The 1-point score is thus not warranted under the Piotroski analysis, as the downward trend casts doubts on its operational improvements.

Operating Cashflow are higher than Netincome?

This criterion examines if a company's operating cash flow (OCF) is higher than its net income, an indication of earnings quality and cash profitability.

For Roivant Sciences in 2023, the operating cash flow is -843.393 million USD, which is higher than the net income of -1,009.03 million USD. Despite both figures being negative, the relatively better OCF suggests a positive cash flow trend in comparison to the net loss. Historically, Roivant's OCF has also shown improvement, from -1,023.502 million USD in 2019 to -843.393 million USD in 2023. Similarly, the net income has fluctuated, depicting the importance of assessing the trend over years. The accruals data indicate a consistent reduction, reinforcing the idea that cash flow operations are gradually stabilizing despite the losses. Overall, this passes the criterion, so a point can be added, representing a relatively better cash situation compared to net income.

Liquidity of Roivant Sciences (ROIV)

Leverage is declining?

Leverage measures debt levels against equity, indicating financial risk. Decrease in leverage suggests reduced risk, increase in financial stability.

In 2023, Roivant Sciences' leverage ratio increased from 0.1054 in 2022 to 0.1795. This represents an increase in debt relative to equity. Analyzing historical leverage data over the past five years—0.0879 in 2019, 0.0438 in 2020, 0.0898 in 2021, 0.1054 in 2022, and 0.1795 in 2023—the trend shows a significant upward trajectory. This rise in leverage signals potentially higher financial risk for Roivant Sciences, thus earning 0 points in the Piotroski Score for this criterion.

Current Ratio is growing?

The current ratio highlights a company's ability to cover its short-term obligations with its short-term assets and is crucial for evaluating liquidity.

Roivant Sciences (ROIV) had a current ratio of 6.6016 in 2023, down from 11.6427 in 2022, indicating a decrease. Thus, this results in 0 points. Historically, the ratio has been fluctuating, with a notable peak in 2020 at 24.0913. Despite this decrease, it's still higher than the industry median of 5.7831 in 2023 but shows a deteriorating trend from its more robust 2022 figure, which could raise concerns over declining short-term liquidity. Evaluating this in the broader historical context and against the industry median adds weight to the analysis.

Number of shares not diluted?

Shares outstanding refer to a company's stock currently held by all its shareholders, including share blocks held by institutional investors and restricted shares.

As per the data provided, Roivant Sciences had outstanding shares of 669,753,458 in 2022 and 712,791,115 in 2023. This indicates an increase in outstanding shares. As a result, no point would be added for this criterion according to Piotroski's analysis. Particularly over the last five years, shares have shown a significant increase from the previous years, confirming the upward trend. The increase in outstanding shares could be unfavorable as it may dilute the value of existing shares.

Operating of Roivant Sciences (ROIV)

Cross Margin is growing?

The Change in Gross Margin is one of the key indicators in Piotroski analysis as it reflects the improvement or deterioration in a company's efficiency in controlling production costs relative to its revenues. A higher gross margin suggests better cost management and potentially higher profitability.

The Gross Margin for Roivant Sciences (ROIV) decreased from 0.8378 in 2022 to 0.7858 in 2023. Despite this decline, it is important to highlight that Roivant still maintains a Gross Margin well above the industry median, which was 0.4518 in 2023. Over the last five years, Roivant's Gross Margin has displayed significant fluctuations – with a notable trough at -2.9053 in 2020, indicating a period of significant cost inefficiency, contrasted by a peak of 0.9136 in 2021. Given this decline in Gross Margin from 2022 to 2023, this criterion scores 0 points in the Piotroski analysis. Though competitive relative to the industry, the downward trend necessitates scrutiny regarding Roivant's ongoing operational efficiency and cost control measures.

Asset Turnover Ratio is growing?

Asset turnover measures a firm's efficiency at using its assets to generate sales or revenue. A higher ratio implies more efficient use of assets.

In 2022, Roivant Sciences (ROIV) had an asset turnover of 0.0214, which increased to 0.0246 in 2023. This signifies an improvement in the company's efficiency in generating revenue from its assets, thus a point is added under the Piotroski criterion. It's worth noting that, although there was a slight dip in 2021 to 0.0094 from 0.035 in 2020, the overall trend over the past five years shows a recovery phase, indicating a positive direction moving forward.