Last update on 2024-06-07

JM Smucker (SJM) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

In-depth Piotroski F-Score analysis of JM Smucker (SJM) for 2023, with a final score of 5/9, assessing profitability, liquidity, and operating efficiency.

Short Analysis - Piotroski Score: 5

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

We analyzed the JM Smucker (SJM) company against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency. The important highlights are: a Piotroski Score of 5 out of 9 for 2023, indicating an average financial health. Key points include negative net income leading to zero points but strong positive cash flow adding 1 point, alongside a declining ROA contributing zero points. Also, liquidity is favorable with a rising current ratio and reduced outstanding shares. Lastly, operational aspects show a mixed picture with decreasing gross margins but increasing asset turnover ratio.

Insights for Value Investors Seeking Stable Income

With a Piotroski Score of 5, JM Smucker (SJM) exhibits average financial health. The positive cash flow and improved asset turnover ratio are good signs. However, the negative net income and shrinking gross margin are concerns. As an investor, you might want to look into this stock further but keep an eye on these troubling aspects. Consider comparing it with competitors to gain a broader perspective of its standing in the industry before making a decision.

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

Profitability of JM Smucker (SJM)

Company has a positive net income?

This criterion checks if the net income of JM Smucker is positive, which indicates profitability.

The net income for JM Smucker (SJM) in 2023 is -$91,300,000, which is negative. Over the last 20 years, JM Smucker has generally shown positive net income. Notably, in years like 2018 and 2019, the net income reached impressive highs of over $1 billion and $514 million respectively. However, the dip in 2023 reflects potential challenges or temporary setbacks. A negative net income results in a score of 0 for this criterion, indicating a less favorable financial condition currently.

Company has a positive cash flow?

Analyze the CFO for JM Smucker and its significance over 20 years. Determine positive or negative for Piotroski score.

The CFO for JM Smucker in 2023 is $1,194,400,000 which is positive. According to the Piotroski F-score criteria, a positive CFO indicates a profitable enterprise with solid cash-generation ability. This trend has been generally positive over the last 20 years. Notably, since 2003, the CFO has shown an upward trajectory rising from $165,965,000 to the current figure, except for a few fluctuations. In recession years like 2008, the CFO was lower at $191,577,000 but quickly recovered. The current positive CFO adds 1 point to the Piotroski score, reflecting financial stability and efficient operations.

Return on Assets (ROA) are growing?

The criterion assesses the change in Return on Assets (ROA) year-over-year. ROA is a profitability indicator that measures how efficiently a company can manage its assets to generate earnings. An improvement typically signifies better operational efficiency and profitability.

In 2023, JM Smucker's (SJM) ROA was -0.0059, a decline from 0.0391 in 2022. This marks a significant drop, indicating that the company has moved from profitability to a loss, reflected in a downward trend. This deterioration in ROA results in a score of 0 for this Piotroski criterion. The 20-year historical data further shows that this dip has placed SJM's ROA well below its historical performance as well as the industry median, which remains significantly positive year after year. This negative trend isn't favorable and highlights potential issues in asset utilization and overall operational efficiency in the latest fiscal year.

Operating Cashflow are higher than Netincome?

This criterion compares Operating Cash Flow against Net Income for JM Smucker (SJM). It is crucial as it shows the cash-generating strength of a company, which is more reliable than net income as cash flows can't be manipulated as easily.

In 2023, JM Smucker (SJM) reported an Operating Cash Flow of $1,194,400,000, whereas its Net Income was -$91,300,000. This disparity suggests that while the company is profitable based on Operations Cash Flow, it has booked a net loss, possibly due to non-cash charges or other accounting adjustments, demonstrating good cash generation capability despite reported net losses. Historically, SJM's Operating Cash Flow has been consistently higher which bodes well for its financial health.

Liquidity of JM Smucker (SJM)

Leverage is declining?

Leverage refers to the ratio of a company’s debt compared to its equity. It indicates how much of the company is funded by debt.

The leverage ratio of JM Smucker (SJM) increased from 0.2732 in 2022 to 0.2929 in 2023. This increment signals a rise in the use of debt to finance the company’s assets. This is generally viewed as negative in the Piotroski Analysis model because it implies a higher risk since the company is more heavily reliant on debt. Over the last 20 years, JM Smucker’s leverage has fluctuated, reaching a high of 0.3521 in 2015 and lower points such as 0.084 in 2003. Given the trend, increasing debt in the current year may suggest a less conservative financial strategy, leading to a Piotroski score of 0 for this criterion.

Current Ratio is growing?

Change in Current Ratio is a measure of a company's ability to pay short-term obligations. It's crucial for liquidity analysis.

The Current Ratio for JM Smucker (SJM) increased from 1.0293 in 2022 to 1.4389 in 2023. This denotes a positive trend in the company's liquidity position, indicating an improved ability to cover short-term liabilities. The increase awards the company an additional point in the Piotroski Analysis. Over the last 20 years, SJM's Current Ratio has fluctuated, starting from 2.7898 in 2003 and variously decreasing and increasing to reach 1.4389 in 2023. Comparing this performance against the Industry Median Current Ratio, which has generally stayed around 1.63 to 1.89, SJM shows an improved position but still trends below the industry median in recent years. Nonetheless, the increase from 2022 to 2023 signifies greater organizational efficiency and financial health.

Number of shares not diluted?

Outstanding Shares represent the total shares currently held by all shareholders, including share blocks and restricted shares held by insiders and large institutional investors.

In comparing the outstanding shares of J.M. Smucker (SJM), it is clear from the provided numbers that the total number of shares decreased from 107,900,000 in 2022 to 106,200,000 in 2023. Consequently, this is a positive indication as it generally shows confidence from the company towards its investors and signifies that the company may have repurchased shares. Over the last 20 years, the number of outstanding shares has both increased and decreased, with notable peaks around 2009 and 2010 following mergers and acquisitions. By reducing the number of outstanding shares, the earnings per share (EPS) value becomes more favorable for investors. For this criterion, J.M. Smucker is awarded 1 point as the outstanding shares have indeed decreased in 2023.

Operating of JM Smucker (SJM)

Cross Margin is growing?

This criterion examines the change in the gross margin from one year to the next to gauge the company's profitability.

The gross margin of JM Smucker (SJM) has decreased from 0.3376 in 2022 to 0.3285 in 2023. Hence, this criterion does not add a point for 2023. This decline reflects a decrease in profitability year over year, and it is important to consider this trend when evaluating the company's financial health. When we look at the historical data over the past 20 years, Gross Margin for JM Smucker has fluctuated but generally remained higher compared to the industry median Gross Margin. For example, in 2022 SJM had a Gross Margin of 0.3376, which was significantly higher than the industry median of 0.2773, indicating better profitability relative to its peers. However, in 2023, while the industry median Gross Margin slightly increased to 0.282, SJM's Gross Margin decreased, highlighting a potential concern. Overall, this trend of declining gross margin is not favorable and could signal issues in cost management or pricing strategies.

Asset Turnover Ratio is growing?

The change in Asset Turnover Ratio indicates how efficiently a company is using its assets to generate revenue. An increase in this ratio suggests improved efficiency.

In 2023, JM Smucker's Asset Turnover increased to 0.5494 from 0.4947 in 2022. This trend shows a positive development in the company’s ability to generate revenue from its assets. Historically, this ratio has fluctuated, with a high of 1.2258 in 2003, but it has seen a downtrend with periodic increases. The rise in 2023 adds 1 point to the Piotroski F-Score, reflecting improved operational efficiency.