Last update on 2024-06-07

Telenor (TEQA.F) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

Explore Telenor (TEQA.F) Piotroski F-Score analysis for 2023, with a final score of 7/9. Discover insights on profitability, liquidity, and asset utilization.

Short Analysis - Piotroski Score: 7

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

Based on the Piotroski F-Score for Telenor (TEQA.F), the company scores 7 out of 9. Key positives are its strong net income (NOK 13.73 billion in 2023), positive cash flow from operations (NOK 29.12 billion in 2023), and higher operating cash flow than net income, indicating high earnings quality. Telenor has also shown improvements in declining leverage and an increasing current ratio, improving its liquidity. The reduction in outstanding shares through buybacks further boosts investor confidence. However, concerns arise as the return on assets (ROA) has decreased, and the gross margin has slightly declined. While the asset turnover ratio improved in 2023, its level is still below 2016 values. Overall, Telenor's financial position appears solid with good profitability and efficient operations, though there are areas needing attention.

Insights for Value Investors Seeking Stable Income

Given Telenor's strong performance across 7 out of 9 Piotroski criteria, it's worth considering as a potentially sound investment. The consistently positive net income and cash flow from operations, coupled with effective debt management and share buybacks, highlight its financial robustness. Nonetheless, investors should monitor the declining ROA and slight decrease in gross margin. If these areas of concern are addressed, Telenor could represent a valuable addition to an investment portfolio. It is advisable to keep an eye on the company's asset utilization efficiency and ensure it continues progressing in the right direction.

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

Profitability of Telenor (TEQA.F)

Company has a positive net income?

Net income is the total profit of a company after all expenses and taxes have been deducted from revenues. It's a key indicator of profitability.

For the fiscal year 2023, Telenor (TEQA.F) reported a net income of 13.73 billion. This positive net income marks a substantial profit for the company, thereby adding 1 point to the final Piotroski Score for this criterion. Reviewing the past 20 years, the net income values exhibit significant fluctuations. For instance, in 2020, the net income peaked dramatically at 44.91 billion, contrasting sharply with 2016's 2.83 billion. Despite these variances, the positive net income in 2023 is still notable. Overall, this trend of fluctuating but generally positive net income is a good sign for Telenor's financial health and investor confidence.

Company has a positive cash flow?

The criterion checks if the Cash Flow from Operations (CFO) is positive, which indicates that the company is generating enough cash from its core business activities.

Telenor's CFO for 2023 stands at NOK 29.12 billion, reflecting a positive cash flow. This is a favorable indicator of the firm’s capability to generate cash internally, suggesting that Telenor is effectively managing its operating activities. Over the past 20 years, Telenor has consistently maintained positive CFO figures, peaking at NOK 42.046 billion in 2017. Despite a decrease from NOK 43.82 billion in 2020 to NOK 29.12 billion in 2023, the current positive CFO still demonstrates a robust financial health and efficient operations. Thus, Telenor scores 1 point for this criterion.

Return on Assets (ROA) are growing?

Return on Assets (ROA) is an indicator of how profitable a company is relative to its total assets. An increasing ROA is usually indicative of a company's efficient use of its assets to generate earnings.

Comparing Telenor's ROA of 0.06 in 2023 with 0.1932 in 2022, we observe a decrease, not an increase. Hence, we set the score to 0 for this criterion. This plunges against an industry median ROA, which generally floated above 0.55 over the last two decades showing a consistent industry standard. Though Telenor's operating cash flow has slightly fluctuated, its drop in ROA could be concerning regarding asset utilization efficiency. In 2021, the operating cash flow was at 42,272 million, while it decreased slightly in 2023 at 29,120 million, possibly influencing its lowered ROA.

Operating Cashflow are higher than Netincome?

This criterion assesses whether Operating Cash Flow is higher than Net Income, indicating earnings quality.

In 2023, Telenor has an Operating Cash Flow (OCF) of NOK 29.12 billion, while its Net Income (NI) stands at NOK 13.734 billion. These figures show that the operating cash flow is clearly higher than the net income, which is a positive trend for the company. Operating cash flow surpassing net income often suggests that a company's earnings are of high quality, as cash is more difficult to manipulate than reported earnings. Over the last 20 years, Telenor's OCF has generally trended higher in comparison to its net income, reinforcing this positive indicator. Thus, Telenor earns a point according to the Piotroski score for this criterion.

Liquidity of Telenor (TEQA.F)

Leverage is declining?

Change in Leverage measures the change in Telenor's (TEQA.F) financial leverage, comparing debt to equity annually.

Examining the leverage of Telenor (TEQA.F), we see a decrease from 0.4317 in 2022 to 0.3954 in 2023. This indicates a reduction in financial leverage, which is typically viewed as a positive trend from a credit risk perspective. Over the last 20 years, Telenor's leverage has fluctuated significantly, reaching a low of 0.0899 in 2009 and a high of 0.5221 in 2020. Given this historical context, the decrease seen in 2023 suggests a return to more conservative financial management, thus earning Telenor a full point for this criterion in the Piotroski analyses.

Current Ratio is growing?

The Current Ratio compares a firm's current assets to its current liabilities and indicates its ability to pay short-term obligations.

In 2023, Telenor (TEQA.F) had a Current Ratio of 0.8644 compared to 0.5984 in 2022. This increase signifies improved liquidity and better short-term financial health, thus earning 1 point. Historically, Telenor's Current Ratio has fluctuated, peaking at 1.0179 in 2003 and reaching the lowest at 0.5984 in 2022. Despite the recent increase, it still remains below the industry median of 0.9574 for 2023, suggesting the need for further improvement. This trend is favorable but highlights room for growth to meet industry standards.

Number of shares not diluted?

The criterion involves assessing whether the Outstanding Shares have decreased, which would indicate share buyback activity.

The Outstanding Shares for Telenor (TEQA.F) decreased from 1,399,458,000 in 2022 to 1,387,568,000 in 2023. This reduction in shares illustrates a trend of share buybacks, which is generally viewed positively by investors. Such buybacks can indicate confidence from the company's management in its own financial health and investment in improving earnings per share (EPS). Looking at the historical data over the last 20 years, Telenor has shown a general decremental trend in its Outstanding Shares, particularly evident from a high of 1,776,000,000 in 2003 to 1,387,568,000 in 2023. As such, for the year 2023, 1 point is awarded for this criterion.

Operating of Telenor (TEQA.F)

Cross Margin is growing?

Gross Margin compares a company's gross profit to its revenue, indicating the efficiency in managing production costs.

Telenor's Gross Margin in 2023 has decreased slightly to 0.7631 from 0.7682 in 2022, which does not add a point in the Piotroski score. While the decrease might appear minimal, it still indicates a slight decline in operational efficiency. Over the last 20 years, Telenor has generally maintained a high gross margin relative to the industry median, which stood at 0.6122 in 2023.

Asset Turnover Ratio is growing?

The asset turnover ratio measures the efficiency of a company's use of its assets in generating sales revenue.

The Asset Turnover for Telenor (TEQA.F) increased from 0.3307 in 2022 to 0.3516 in 2023, which is positive as it indicates improved efficiency in utilizing its assets to generate revenue. Looking at trends over the past 20 years, Telenor had higher efficiency with values above 0.5 before 2016. The rise in 2023 reverses a declining trend since 2015.