Last update on 2024-06-05

Tractor Supply (TSCO) - Piotroski F-Score Analysis for Year 2023 (Final Score: 6/9)

Explore Tractor Supply (TSCO) Piotroski F-Score analysis for 2023. Detailed insights on profitability, liquidity, and operational efficiency.

Short Analysis - Piotroski Score: 6

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

The Piotroski F-Score for Tractor Supply (TSCO) is 6 out of 9. The analysis covers profitability, liquidity, and operating efficiency based on nine criteria. TSCO shows positive net income, positive cash flow from operations (CFO), and consistently increasing historical CFO, contributing positively to its score. However, there is a slight decline in Return on Assets (ROA) year-over-year. The Operating Cash Flow is higher than the net income, indicating quality earnings. In terms of liquidity, TSCO's leverage has increased slightly, raising potential risks. However, the company's current ratio has grown, signaling better liquidity. The reduction in outstanding shares further adds a positive signal. Lastly, while the gross margin has improved, the asset turnover has declined slightly, indicating reduced efficiency in revenue generation from assets.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 6, Tractor Supply (TSCO) exhibits good financial health, especially in profitability and liquidity aspects. The company shows strong net income and positive cash flow trends, which underscores its efficient operations. However, the decreasing ROA and asset turnover highlight areas where the company's performance could be optimized. For investors, TSCO is worth considering due to its strong financial metrics and profitability. However, it's essential to keep an eye on its leverage and efficiency in asset utilization. Potential investors should weigh these factors before making any investment decisions.

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

Profitability of Tractor Supply (TSCO)

Company has a positive net income?

Net income indicates the company's total earnings and is crucial for evaluating profitability.

Tractor Supply's net income for 2023 stands at $1,107,226,000, which is positive. A consistent rise in net income over the years—from $56,501,000 in 2003 to $1,107,226,000 in 2023—signifies a robust growth trajectory. This positive trend implies effective business strategies and financial health, earning it 1 point according to the Piotroski Analyses.

Company has a positive cash flow?

Positive Cash Flow from Operations (CFO) indicates that a company's core operations are generating sufficient cash to maintain and grow the business.

The Cash Flow from Operations for Tractor Supply (TSCO) in 2023 is indeed positive, standing at $1.33 billion. This trend is highly favorable as it underscores the company's robust operating capability. Looking at the historical data, we observe a significant upward trajectory in the company's CFO over the past 20 years, with only minor fluctuations. For instance, from $62 million in 2003 to $1.33 billion in 2023, this consistent increase illustrates the company's growing profitability and efficient cash management. Thus, TSCO earns a full point in this Piotroski criterion for its impressive and positive cash flow from operations.

Return on Assets (ROA) are growing?

The Change in ROA criterion evaluates the year-over-year change in Return on Assets (ROA).

For Tractor Supply (TSCO), the ROA decreased from 0.1339 in 2022 to 0.1253 in 2023. This change does not warrant adding a point based on the Piotroski analysis methodology. The decline in ROA signals a slight decrease in the company's efficiency in generating profits from its assets. Therefore, the criterion is set to 0.

Operating Cashflow are higher than Netincome?

Examining whether the Operating Cash Flow is higher than Net Income for Tractor Supply (TSCO) is crucial. This criterion helps in assessing the quality of a company's earnings. Operating Cash Flow being higher than Net Income indicates that the company's earnings are supported by strong cash flow, signaling efficient cash management and operational efficiency.

For the fiscal year 2023, Tractor Supply (TSCO) reported an Operating Cash Flow of $1,334,033,000, while its Net Income stood at $1,107,226,000. Clearly, the Operating Cash Flow surpasses the Net Income. This is a positive sign as it suggests that TSCO’s earnings are backed by robust cash flow, granting it a score of 1 on this criterion. Over the past 20 years, the company's Operating Cash Flow has steadily increased from $62,048,000 in 2003 to $1,334,033,000 in 2023. Meanwhile, Net Income also increased from $56,501,000 to $1,107,226,000. This consistent trend affirms TSCO’s strong operational performance and underscores the company's ability to generate ample cash from its core business activities.

Liquidity of Tractor Supply (TSCO)

Leverage is declining?

Change in Leverage is a key indicator of financial health, showing how the company's debt is managed year over year.

Comparing Tractor Supply's leverage ratio of 0.4618 in 2022 to 0.5075 in 2023, we can observe an increase in leverage. Higher leverage often indicates increased debt relative to equity, which can be riskier, especially during economic downturns. Tracking the last 20 years of leverage, the company has had a relatively low leverage ratio up until recent years, with a noticeable uptick after 2016. This increasing trend might raise concerns about potential over-leveraging and the ability to service its debt, especially if interest rates rise or the company faces operational challenges.

Current Ratio is growing?

The change in Current Ratio is an essential measure of a company's liquidity, indicating if it has enough assets to cover its short-term liabilities. An increasing Current Ratio suggests improved liquidity, enhancing a company's ability to meet short-term obligations

In 2023, Tractor Supply (TSCO) reported a Current Ratio of 1.4992, up from 1.3289 in 2022. This increase is a positive signal for the company's liquidity as it indicates an enhanced capacity to cover short-term liabilities. Historically, TSCO had a higher Current Ratio, as evident from the previous two decades where it generally stayed above 1.5 apart from the last few years. The Current Ratio of 1.4992 is still below the 20-year average but marks an improvement from the preceding year. The industry's median Current Ratio for 2023 is 1.55, which places TSCO slightly below its peers but shows a narrowing gap compared to earlier periods. Overall, the rise in the Current Ratio adds 1 point in the Piotroski Analysis framework.

Number of shares not diluted?

Change in Shares Outstanding evaluates whether the company has been diluting the value of its shares by issuing new stock or repurchasing its own shares, thereby enhancing shareholder value.

In 2023, Tractor Supply's outstanding shares decreased from 111,336,000 in 2022 to 109,096,000. This indicates a reduction of 2,240,000 shares over the course of the year. This reduction in outstanding shares is generally a positive sign as it suggests that the company might be buying back shares, which can be a signal of strong financial health and a commitment to returning value to shareholders. This decreasing trend is positive, and thus, Tractor Supply scores 1 point for this criterion.

Operating of Tractor Supply (TSCO)

Cross Margin is growing?

Change in Gross Margin compares the profitability of Tractor Supply's core operations year-over-year. A higher Gross Margin indicates improved operational efficiency and profitability, essential for shareholder value.

In 2023, Tractor Supply's Gross Margin increased to 35.92% from 35.00% in 2022. This upward trend reflects improved operational efficiency and cost management, contributing positively to profitability. Over the past 20 years, the Gross Margin shows a consistent improvement, with rare declines. Compared to the industry median, Tractor Supply's Gross Margin in 2023 is slightly below the industry's 37.85%, but this isn't alarming given their upward trend. Thus, the result for this criterion is a 1 point addition, denoting positive improvement.

Asset Turnover Ratio is growing?

Asset Turnover measures a company's efficiency in using its assets to generate sales, calculated as sales divided by total assets.

Comparing the Asset Turnover of 1.6468 in 2023 with 1.7475 in 2022 reveals a slight decrease. This suggests that Tractor Supply (TSCO) has become slightly less efficient in utilizing its assets to generate revenue. Historically, Asset Turnover has been declining, as evidenced by a significant drop from 2.9602 in 2003 to the current level. The decline from last year earns a score of 0 in the Piotroski analysis, indicating a negative trend in asset utilization efficiency.