Last update on 2024-06-06

Trimble (TRMB) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

In-depth analysis of Trimble's (TRMB) Piotroski F-Score for 2023 with a final score of 5/9, assessing profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 5

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

Trimble (TRMB) has been evaluated using the Piotroski F-Score, which rates a company's financial strength on a scale from 0 to 9. Trimble achieved a score of 5. Here's a breakdown: 1. **Profitability**: Trimble has a positive net income ($311.3M in 2023) and a positive cash flow from operations ($597.1M in 2023). However, its Return on Assets (ROA) has declined from 0.0626 in 2022 to 0.037 in 2023. On a positive note, operating cash flow is higher than net income, indicating good earnings quality. 2. **Liquidity**: The company's leverage has increased significantly from 0.1823 in 2022 to 0.2786 in 2023, indicating rising financial risk. The analysis didn't provide details on the current ratio. 3. **Operating Efficiency**: Trimble's gross margin improved from 57.27% in 2022 to 61.41% in 2023. However, the asset turnover ratio has declined from 0.5117 in 2022 to 0.452 in 2023, suggesting less efficient use of assets. Overall, Trimble shows strengths in profitability and gross margin but faces challenges with ROA, leverage, and asset turnover.

Insights for Value Investors Seeking Stable Income

Based on the Piotroski F-Score analysis, Trimble (TRMB) scored a 5 out of 9, indicating an average financial health. If you're an investor, it's worth looking into mid-term improvements and specific strategic actions the company is taking to address issues related to ROA, leverage, and asset turnover. While there are strengths such as positive net income, and growing gross margins, potential risks from declining asset efficiency and increasing debt should be carefully monitored 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 Trimble (TRMB)

Company has a positive net income?

Net income is a crucial metric that shows the profitability of the company. A positive net income indicates that the company is generating profit after all expenses have been deducted.

For the fiscal year 2023, Trimble (TRMB) reported a net income of $311.3 million. This positive figure is significant as it demonstrates that the company has been able to produce profit after accounting for all its costs and expenses. Historically, Trimble has also reflected a substantial ability to generate profits, as evidenced by the net income values over the past 20 years provided in the chart data. For instance, in 2019 and 2021, net incomes were as high as $514.3 million and $492.8 million, respectively. However, the net income has declined steadily over the past two years, dropping from $492.8 million in 2021 to $311.3 million in 2023. Despite this decline, the positive net income keeps Trimble at 1 point for this criterion in the Piotroski Analysis.

Company has a positive cash flow?

A positive Cash Flow from Operations (CFO) figure ensures that a company is generating enough cash from its regular business activities, which is of paramount importance for sustainability and expansion.

For 2023, Trimble (TRMB) reported a CFO of $597,100,000 which is positive. This shows a positive trend in the company's ability to generate cash from its regular business operations. Adding 1 point on the Piotroski score for this criterion is justified. Historically, Trimble has maintained a positive CFO for the last 20 years, with figures generally on an upward trend except for a dip in 2022 ($391,200,000). Nevertheless, the latest CFO figure restores confidence in the financial health of the company.

Return on Assets (ROA) are growing?

The change in Return on Assets (ROA) from one period to another evaluates the efficiency with which a company is using its assets to generate earnings. This criterion is important as it indicates the improvement or deterioration in asset utilization, directly impacting profitability metrics.

In 2022, Trimble (TRMB) posted a ROA of 0.0626, which declined to 0.037 in 2023. This represents a notable decrease in the efficiency with which the company generated profits from its asset base. Given this decline, the company earns 0 points for this criterion. Historically, Trimble's ROA has exhibited variability, especially when compared to the industry median. While the industry median ROA showed consistent strength, attaining levels as high as 0.521 in 2020, Trimble's recent performance appears subpar. Such a decline in ROA might warrant deeper exploration into operational or sector-specific challenges.

Operating Cashflow are higher than Netincome?

Operating Cash Flow higher than Net Income criterion checks if TRMB is generating sufficient cash from its operations to cover its reported earnings. This indicates the quality of earnings.

In 2023, Trimble (TRMB) reported an Operating Cash Flow of $597.1 million versus a Net Income of $311.3 million. The Operating Cash Flow being higher than Net Income is a positive indicator, suggesting that the company has strong cash generation capabilities to support its earnings. Over the past 20 years, Trimble's Operating Cash Flow has generally been on an upward trend, particularly increasing from $364.6 million in 2003 to $597.1 million in 2023. This implies a robust ability of the firm to consistently generate cash, reinforcing the credibility of its reported earnings. Thus, for this criterion, TRMB scores 1 point, indicating good earnings quality.

Liquidity of Trimble (TRMB)

Leverage is declining?

Change in Leverage is essential because it reflects a company's financial risk; lower leverage suggests less reliance on debt.

In 2022, Trimble had a leverage ratio of 0.1823, which increased to 0.2786 in 2023. This reflects a higher reliance on debt in 2023. Historically, Trimble's leverage fluctuated, peaking at 0.2964 in 2018 and dipping to as low as 0.0005 in 2006. The increase in leverage from 2022 to 2023 is substantial, marking a 52.84% rise, suggesting a higher financial risk. Thus, this criteria garners 0 points.

Current Ratio is growing?

Explain the criterion for Trimble (TRMB) and why it is important to consider

The Current Ratio measures a company's ability to pay off its short-term liabilities with its short-term assets. A higher current ratio indicates better liquidity and financial health.

Number of shares not diluted?

Change in Shares Outstanding is a measure used to gauge the issuance or repurchase of company shares. A decrease in outstanding shares indicates share buybacks, enhancing shareholder value.

Comparing the outstanding shares of 248,600,000 in 2022 with 0 in 2023, it is clear that Trimble's (TRMB) outstanding shares have increased drastically in 2023. Notably, looking at the historical data over the last two decades, the pattern shows usual fluctuations but never a drop to zero. The result of increasing outstanding shares with a zero value in 2023 suggests a reporting error or significant corporate action such as a buyout or privatization. Hence, according to the Piotroski Analysis, this condition does not add a point and is set to 0. This is a bad trend under this criterion.

Operating of Trimble (TRMB)

Cross Margin is growing?

Gross Margin measures the proportion of revenue that exceeds the cost of goods sold, showing how efficiently a company is producing its goods. An increase is typically a positive indicator of financial health.

Trimble's Gross Margin increased from 0.5727 in 2022 to 0.6141 in 2023, earning it 1 point in the Piotroski Score. This 4.13 percentage point increase signifies improved efficiency and profitability. Comparing this to the industry median, which decreased from 0.503 in 2022 to 0.4813 in 2023, Trimble's performance is particularly commendable. Over the past two decades, Trimble has been consistently above the industry median, indicating robust operational efficiency. The upward trend in gross margin bodes well for continued profitability and competitive advantage.

Asset Turnover Ratio is growing?

Asset turnover represents a company's ability to generate revenue from its assets. It is calculated as sales or revenues divided by total assets and indicates how efficiently a company is using its assets to produce sales.

Trimble's asset turnover ratio decreased from 0.5117 in 2022 to 0.452 in 2023. This decline suggests that the company was less efficient in using its assets to generate revenue in 2023 compared to the previous year. Examining historical data, the asset turnover ratio has generally seen a downward trend over the past two decades, notably decreasing from 1.1157 in 2004 to its current level. A lower asset turnover can be a signal for investors to explore the causes, potentially indicating issues such as asset base expansion without corresponding revenue growth. Given the decline in 2023, the score is 0 for this criterion.