Last update on 2024-06-07

Sify Technologies (SIFY) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Sify Technologies: Piotroski Analysis for 2023 showing financial performance with a low score of 3/9. Insights on profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 3

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

The Piotroski F-Score is a number between 0 to 9 used to evaluate the financial strength of a company based on profitability, liquidity, and operational efficiency. Sify Technologies (SIFY) was analyzed and scored a 3 out of 9. The analysis included key financial metrics such as net income, cash flow from operations, return on assets (ROA), leverage, current ratio, gross margin, and asset turnover. The company showed consistency in positive net income and cash flow from operations, earning points in those criteria. However, Sify fell short in several areas including declining ROA, increasing leverage, lower current ratio, share dilution, decreasing gross margin, and asset turnover ratio.

Insights for Value Investors Seeking Stable Income

Given Sify Technologies' Piotroski F-Score of 3 out of 9, the company may not currently offer robust investment potential. Despite having strong points in net income and cash flow, the declines in profitability measures like ROA, increased leverage, reduced gross margin, and lower asset turnover suggest financial struggles. Investors may want to approach this stock with caution and consider monitoring its performance for improvements in these areas before making an investment decision.

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

Profitability of Sify Technologies (SIFY)

Company has a positive net income?

Net Income is a crucial metric indicating a company's profitability after all expenses have been deducted from revenues. A positive net income signifies that the company is profitable.

Sify Technologies (SIFY) has reported a positive net income of 674,522,000 in 2023. When we look at the historical data, it's evident that SIFY has maintained a positive net income in most recent years, suggesting a consistent trend of profitability. Specifically, over the last 20 years, Sify has achieved positive net income in 13 out of 21 years, and since 2012, it has maintained positive net income in all but one year (2012). This trend indicates strong financial health and operational efficiency. In light of the Piotroski F-Score, Sify Technologies earns 1 point for this criterion.

Company has a positive cash flow?

Check if Cash Flow from Operations (CFO) is positive and add 1 point if it is positive, otherwise add 0 points. Positive CFO is an important indicator of a company's ability to generate cash from its core business operations.

In 2023, Sify Technologies reported a Cash Flow from Operations (CFO) of 8,338,238,000, which is positive. This marks a substantial improvement not only from the previous year but also continues a positive trend seen over the past few years. For instance, in 2021 and 2022, the CFO stood at 6,966,708,000 and 2,244,668,000 respectively. This trend indicates a consistent strengthening of Sify Technologies' ability to generate cash internally, a vital sign of financial health and operational efficiency. Consequently, this criterion earns the company 1 point.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA) measures the net income generated from total assets, indicating operational efficiency.

For Sify Technologies (SIFY), the ROA decreased from 0.03 in 2022 to 0.0129 in 2023. This marks a significant decline and shows that the company has become less efficient in generating profits from its assets compared to the previous year. When we look at the long-term data, the industry median ROA for the past 20 years has steadily remained above 0.5, indicating that Sify's current ROA is notably lower than the industry standard. Additionally, while focusing on the company's operating cash flow over the last 20 years, a sporadic but growing trend is observed, which doesn't directly align with the decreasing ROA. Therefore, Sify receives 0 points for this criterion under the Piotroski Analysis due to a declined ROA in 2023.

Operating Cashflow are higher than Netincome?

Evaluating whether Operating Cash Flow is higher than Net Income provides a snapshot of a company's earnings quality. Operating Cash Flow, being higher, indicates that a company is generating sufficient cash from its core business operations, indicating financial health and lower dependency on external financing or accounting adjustments for reported profits. This is a typically positive signal for investors and stakeholders.

In 2023, Sify Technologies reported an operating cash flow of ₹8,338.24 million, which is significantly higher than its net income of ₹674.52 million. This results in earning 1 point on the Piotroski scale, reflecting robust cash generation from operations. Reliability in cash flow as opposed to net income enhances investor confidence by affirming that the net income isn't artificially inflated. Over the past two decades, Sify's operating cash flow shows a positive and progressive trend with a few minor fluctuations, corroborating financial robustness and efficiency in managing core operations. Therefore, this criterion bodes well for Sify Technologies.

Liquidity of Sify Technologies (SIFY)

Leverage is declining?

Change in Leverage considers whether a company's leverage ratio has decreased over time. It reflects the financial risk of the company.

In 2022, Sify Technologies recorded a Leverage of 0.2015, while in 2023, it increased to 0.2732. This increment in the leverage ratio implies that the company's use of debt to finance its assets has grown, which may increase the financial risk. Despite the spike in 2023, leveraging levels have been gradually increasing over the past two decades, peaking this year. Hence, according to the Piotroski criteria, the Leverage criterion receives 0 points due to the rise in 2023.

Current Ratio is growing?

The Current Ratio signifies a company's ability to pay short-term obligations. High Current Ratio indicates liquidity.

For 2023, Sify Technologies (SIFY) has a Current Ratio of 1.0117, marginally down from 1.0427 in 2022. This suggests a slight decrease in liquidity, although still above the industry's median of 0.9574. Historically, the company's ratio is generally over the industry benchmark, which reassures Sify's comparative safety in meeting near-term liabilities. However, the current drop in Current Ratio highlights a minor red flag for short-term solvency. No point added here for the Piotroski Score due to the decrease in ratio.

Number of shares not diluted?

This criterion evaluates the change in the number of shares outstanding year-over-year - crucial for understanding share dilution.

For 2022, Sify Technologies reported 182,468,672 outstanding shares, which rose slightly to 182,803,189 in 2023. Given that the outstanding shares increased rather than decreased, this criterion should be marked as 0 points. Over the last 20 years, the trend in outstanding shares has shown gradual increases overall, with noticeable jumps especially between 2010 and 2011 and again towards recent years. This increase could be a dilutive move, meaning the company's ownership is spread across a larger number of shares, potentially diluting shareholder value if not counterbalanced by profit increases or growth measures. The increase in number of shares directly leads to a 0 score under the Piotroski F-score model for this criterion, which is indicative of shareholder dilution.

Operating of Sify Technologies (SIFY)

Cross Margin is growing?

Gross Margin compares a company's sales revenue minus its cost of goods sold, divided by the total sales revenue.

A Gross Margin is an essential criterion in Piotroski analysis because it indicates how efficiently a company is producing its goods relative to its total revenue. For Sify Technologies (SIFY), the Gross Margin decreased from 0.4064 in 2022 to 0.36 in 2023, thus the score for this criterion should be set to 0. Although Sify Technologies has faced a decline, it is notable that the industry median for Gross Margin has been relatively stable over the years and stood at 0.6122 in 2023. This indicates that SIFY is underperforming its broader industry regarding production efficiency.

Asset Turnover Ratio is growing?

Asset turnover is a financial ratio that measures the efficiency of a company's use of its assets in generating sales revenue. A higher ratio indicates better performance.

The Asset Turnover for Sify Technologies decreased from 0.6455 in 2022 to 0.6395 in 2023. This decline indicates a slight reduction in the efficiency with which Sify Technologies uses its assets to generate revenue. Over the last 20 years, SIFY has seen various fluctuations, peaking at 0.9396 in 2006. Given the trend, this decrease in 2023 is a negative signal, resulting in a score of 0 points. This could indicate that the company needs to better utilize its assets or look into managing them more effectively to boost turnover ratios in upcoming years.