Last update on 2024-06-04

Solvay (SOL.F) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Analyzing Solvay (SOL.F) using Piotroski F-Score for 2023 reveals a score of 6/9, showing moderate financial health through profitability and liquidity metrics.

Short Analysis - Piotroski Score: 6

We're running Solvay (SOL.F) against the Piotroski 9-criteria scoring system to assess profitability, liquidity, and operating efficiency:

We've analyzed Solvay (SOL.F) against the Piotroski F-Score, assessing profitability, liquidity, and operating efficiency. Overall, Solvay scored 6 out of 9, which indicates solid financial health. **1. Profitability:** * **Net Income:** Positive in 2023 at EUR 2,093,000,000, showing a strong recovery from losses in 2020. * **Cash Flow from Operations (CFO):** Positive and consistently robust at €1.911 billion. * **Return on Assets (ROA):** Grew significantly from 0.0936 in 2022 to 0.1512 in 2023, showing improved efficiency. * **CFO vs Net Income:** Criterion not met as CFO is lower than Net Income. **2. Liquidity:** * **Leverage:** Decreased from 0.1165 to 0.0346, indicating reduced financial risk. * **Current Ratio:** Decreased from 1.435 to 1.2381, showing weaker short-term liquidity. * **Share Dilution:** Increase in outstanding shares, indicating dilution. **3. Operating Efficiency:** * **Gross Margin:** Increased from 0.1785 to 0.2295, reflecting core profitability improvement. * **Asset Turnover Ratio:** Increased from 0.3919 to 0.4353, indicating better asset efficiency.

Insights for Value Investors Seeking Stable Income

Solvay (SOL.F)'s Piotroski Score of 6 out of 9 highlights many positives such as strong profitability, reduced leverage, and improved operating efficiency. Though liquidity and share dilution show areas of concern, the overall financial health looks promising. Therefore, it could be a worthwhile stock to investigate further as an investor. The company's ability to recover from the past few years' challenges and moving towards financial stability makes it an attractive prospect for investment.

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

Profitability of Solvay (SOL.F)

Company has a positive net income?

One point is granted if the most recent Net Income is positive. Positive net income is a sign of profitability.

For Solvay (SOL.F), the Net Income in 2023 is EUR 2,093,000,000, which is positive. This grants a score of 1 according to the Piotroski criteria. This positive trend is significant as it indicates the company is profitable. Looking at the last 20 years, Solvay has shown a robust ability to generate profit, especially compared to a loss in 2020. The upswing from EUR -962,000,000 to EUR 2,093,000,000 within three years highlights exceptional recovery and robust performance. Thus, this is a good trend.

Company has a positive cash flow?

This criterion assesses the firm's efficiency in generating cash from its core business operations.

Solvay's Cash Flow from Operations (CFO) in 2023 stands at €1.911 billion, which is positive. This indicates a robust inflow of cash from the company's core business activities. Historically, Solvay has maintained a positive operating cash flow over the past 20 years. For instance, in 2019, the CFO was €1.815 billion, while in 2022, it was €2.006 billion. The positive trend underscores consistent operational efficiency and is a favorable sign for investors. Hence, for this Piotroski criterion, Solvay scores 1 point.

Return on Assets (ROA) are growing?

Change in ROA (Return on Assets) compares the profitability of a company relative to its total assets year-over-year. It's important to consider this because an increasing ROA indicates the company is improving in efficiently generating profits from its assets.

Solvay’s ROA increased from 0.0936 in 2022 to 0.1512 in 2023, which translates to an increase of 61.53%. This positive trend earns the company 1 point for this criterion. This significant uptick indicates that Solvay has increased its efficiency in utilizing its assets to generate profit. When compared to the last 20 years, Solvay’s ROA has fluctuated considerably, with particularly high dips during the financial crisis of 2008 (around 0.2038 industry median) and a notable increase in the operating cash flow trend generally. Although Solvay's 2023 ROA of 0.1512 is still below the industry median of 0.2238 for the same year, the considerable increase relative to 2022 is a positive trend for Solvay.

Operating Cashflow are higher than Netincome?

Operating Cash Flow (OCF) higher than Net Income is an indicator that a company is generating enough cash from its operations to cover its net earnings.

For Solvay (SOL.F) in 2023, the Operating Cash Flow (OCF) is €1,911 million while the Net Income is €2,093 million. Since the Operating Cash Flow is lower than the Net Income, this criterion is not met and thus scores 0 points. Historically, Solvay's OCF and Net Income have shown some fluctuations, but in recent years, OCF often falls short of Net Income, as evidenced by the accrual ratio increasing significantly to 0.2721 in 2023 compared to historical levels. This suggests higher earnings might be due to non-cash items or accounting adjustments rather than actual cash flows. This trend might be a risk indicator as it implies less operational cash generating capacity relative to reported earnings.

Liquidity of Solvay (SOL.F)

Leverage is declining?

Compare change in Financial Leverage by analyzing debt versus equity ratios. Important for assessing financial risk.

Solvay's leverage has decreased significantly from 0.1165 in 2022 to 0.0346 in 2023, resulting in a +1 score in this criterion. This downward trend signifies a decrease in the company’s financial risk and an improvement in its financial health. Historical leverage data shows a similar trend with the highest leverage of 0.2222 in 2015 and the lowest before 2023 being 0.083 in 2014. The current low leverage metric suggests prudent financial management and reduced dependency on debt financing.

Current Ratio is growing?

The Current Ratio is a liquidity ratio that measures a company's ability to pay short-term obligations with its current assets. It is significant because it shows the company's short-term financial health.

Between 2022 and 2023, Solvay’s Current Ratio decreased from 1.435 to 1.2381. This indicates a decline in the company’s short-term liquidity, suggesting a reduced ability to cover short-term liabilities with current assets. Historically, the company's Current Ratio has been volatile, peaking in 2009 at 2.6205 and hitting a low in 2005 at 1.0954. Over the past 20 years, Solvay's Current Ratio has generally remained below the industry median, which stands at 1.5873 for 2023, showing a consistent trend of weaker short-term liquidity compared to industry peers. Consequently, this criterion scores 0 points for 2023.

Number of shares not diluted?

This criterion evaluates the company's capital structure dilutions or consolidations. A reduction in outstanding shares suggests capital efficiency, while an increase may indicate dilution.

Solvay (SOL.F) saw an increase in outstanding shares from 103,744,461 in 2022 to 104,160,774 in 2023. This means shares outstanding increased by 416,313. This upward trend in outstanding shares does not meet the Piotroski criteria for decreasing shares, indicative of potential dilution. Therefore, this criterion scores a 0, not contributing favorably to Piotroski's score. Historically, Solvay's share count has varied, with notable increases in 2016 to above 103 million, influencing the company's approach to managing its equity.

Operating of Solvay (SOL.F)

Cross Margin is growing?

The change in gross margin is evaluated by comparing the most recent year's gross margin to the previous year's value. Gross margin reflects the core profitability of the company.

For Solvay (SOL.F), the Gross Margin in 2023 was 0.2295, an increase from 0.1785 in 2022. This marks an improvement in core profitability. Historically, Gross Margin peaked at 0.3482 in 2006, and the low was 0.1785 in 2022, showing substantial recovery in 2023. The industry median in 2023 was 0.2238, making Solvay’s performance above the median. This positive trend earns Solvay 1 point in the Piotroski Score.

Asset Turnover Ratio is growing?

Asset turnover ratio measures the efficiency of a company's use of its assets in generating sales revenue over a period of time.

Comparing the asset turnover ratio from 2022 (0.3919) to 2023 (0.4353), there is a notable increase. This suggests that Solvay (SOL.F) has improved its efficiency in generating sales from its assets in 2023. Historically, Solvay's asset turnover ratio fluctuated, with values ranging from 0.7892 in 2003 to a low of 0.3919 in 2022 before this recent increase. Therefore, the trend for the last year seems positive, indicating a promising boost in asset efficiency. Consequently, one point should be added.