Last update on 2024-06-06

TE Connectivity (TEL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

TE Connectivity (TEL) Piotroski F-Score Analysis for 2023 with final score 5/9. Detailed financial performance assessment through key profitability, liquidity and leverage criteria.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score for TE Connectivity (TEL) evaluates its financial strength using profitability, liquidity, and efficiency criteria. TEL scores 5 out of 9, indicating moderate financial health. Key aspects of profitability show positive net income and strong cash flow from operations. However, a drop in Return on Assets (ROA) suggests a slight efficiency concern. In terms of liquidity, TEL demonstrates an increasing current ratio, but leverage has slightly risen. For operational efficiency, gross margin and asset turnover ratios have slightly declined. Lastly, a beneficial decrease in the number of outstanding shares indicates improvements in shareholder value.

Insights for Value Investors Seeking Stable Income

TE Connectivity (TEL) has a moderate Piotroski score suggesting decent financial health but has room for improvement, particularly in operational efficiency and leverage management. Potential investors should conduct a deeper analysis into the company's long-term strategy and recent declines in gross margin and asset turnover to make an informed decision. Overall, TEL can be a suitable investment with the current indications of positive profitability and liquidity trends but investors should be vigilant regarding operational efficiency metrics.

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

Profitability of TE Connectivity (TEL)

Company has a positive net income?

Checking the Net Income is crucial to understand whether the company is profit-generating or not.

TE Connectivity (TEL) has recorded a net income of $1.91 billion in 2023, marking a positive net income. Over the last 20 years, the firm has had 5 years with negative net income values, with the most substantial losses being in 2009 (-$3.256 billion) and 2020 (-$241 million). Despite these setbacks, the trend for TE Connectivity remains largely positive in terms of net income, showcasing the company's ability to maintain profitability in the majority of the previous two decades. This positive net income in 2023 adds 1 point to our Piotroski score criteria for the company, signifying a continued trend of financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is the cash generated by a company's regular operating activities. It's a crucial indicator of financial health.

For TE Connectivity (TEL) in 2023, the CFO is $3,132,000,000, indicating a positive CFO, which adds 1 point to its Piotroski Score. This is a good trend, as it signifies strong internal cash generation. Reviewing the last 20 years, TEL's CFO has generally trended upwards, especially post-2003, reflecting robust operational performance.

Return on Assets (ROA) are growing?

Change in Return on Assets (ROA): Compare the ROA of 0.0899 in 2023 with the ROA of 0.115 in 2022. If the ROA increased in 2023 add 1 point if not set it to 0. Result: The ROA increased in 2023.

The Return on Assets (ROA) for TE Connectivity (TEL) saw a decline from 0.115 in 2022 to 0.0899 in 2023, marking a drop and hence setting ROA score to 0. While this reduction might seem concerning, it's useful to analyze through a broader lens: over the last 20 years, TE Connectivity's operating cash flow has been relatively robust, reaching a peak of $3.1 billion in 2023. Comparing industry-wide ROA trends, where the median has generally been higher (around 0.2104 to 0.2787), TE Connectivity's 2023 ROA stands below but the firm's solid operational cash flows indicate strong internal management. However, a sustained lower ROA compared to industry medians might signal lesser efficiency or unique strategic focuses worth deeper investigation.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income is a measure of a company's financial health, indicating strong cash-generating capabilities.

For TE Connectivity (TEL) in 2023, the Operating Cash Flow is $3,132,000,000, significantly higher than the Net Income of $1,910,000,000. This adds a point in the Piotroski score, suggesting strong cash-generating capabilities. Historically, the company has shown an upward trend in Operating Cash Flow, reaching its highest point in 20 years. This trend is favorable, indicating improved operational efficiency.

Liquidity of TE Connectivity (TEL)

Leverage is declining?

Change in leverage refers to the shift in the company's debt-to-equity ratio over a period.

TE Connectivity's leverage has increased slightly from 0.1584 in 2022 to 0.1625 in 2023. Although the rise appears marginal, it reverses a previous trend of leverage reduction, as seen over the last two decades. This indicator trends unfavorably for 2023; hence, it earns 0 points.

Current Ratio is growing?

The current ratio measures a company's ability to cover its short-term obligations with its short-term assets. A higher ratio indicates better liquidity and thus a better ability to cover these obligations in the near term, making it a critical indicator of financial health.

TE Connectivity's current ratio increased from 1.5691 in 2022 to 1.7683 in 2023. This positive trend signifies enhanced liquidity, a constructive signal for obligations coverage and financial resilience. This translates into a 1-point score based on Piotroski criteria, indicating improved immediate financial health. Although the increase is promising, it remains below the industry median of 2.0742 in 2023, highlighting room for further improvement.

Number of shares not diluted?

This criterion examines the change in the number of outstanding shares for TE Connectivity (TEL) to assess shareholder dilution.

TE Connectivity (TEL) has experienced a decrease in outstanding shares from 323,000,000 in 2022 to 315,000,000 in 2023. This decrease of 8,000,000 shares is generally positive as it indicates share repurchases by the company, which can signal confidence in the company’s future prospects and improve shareholder value. Over the past 20 years, the company has shown a consistent trend of reducing its outstanding shares, dropping from 495,652,174 in 2003 to 315,000,000 in 2023. This proactive reduction in share count positively affects earnings per share (EPS) and points to effective capital management by the company. Thus, according to the Piotroski analysis, TE Connectivity scores 1 point for this criterion.

Operating of TE Connectivity (TEL)

Cross Margin is growing?

This criterion examines whether a company has improved its gross margin, indicating enhanced operational efficiency. A higher gross margin shows the company is better managing its production costs relative to its sales.

Comparing TE Connectivity's gross margin for 2023 and 2022, we see a slight decrease from 0.3221 in 2022 to 0.3153 in 2023. This results in a decrease of about 0.0068 points. The trend, although minor, is negative and suggests that the company hasn't managed to improve its operational efficiency year-over-year. Since the gross margin has decreased rather than increased, we do not add a point for this criterion. Furthermore, when compared to the industry median (which decreased from 0.2787 in 2022 to 0.2104 in 2023), TE Connectivity's gross margin is significantly higher. However, maintaining gross margin leadership within the industry does not offset the dip in own performance metric. Therefore, the Piotroski score for gross margin remains 0.

Asset Turnover Ratio is growing?

Asset Turnover compares a company's sales to its assets, reflecting efficiency in utilizing assets. A higher ratio indicates better performance.

The Asset Turnover ratio for TE Connectivity (TEL) has decreased from 0.7708 in 2022 to 0.7546 in 2023. This implies a slight reduction in how efficiently TE Connectivity is utilizing its assets to generate revenue. Over the last 20 years, we observe variations in the ratio, with its highest peak at 1.0167 in 2003 and a low of 0.5424 in 2009. This recent decrease, though minor, does not earn an additional point for this criterion according to Piotroski's F-Score method, and we set it to 0. The multi-year data suggests variability, but the recent trend shows a need for improvement in asset efficiency for consistent revenue generation.