Last update on 2024-06-06

Tyler Technologies (TYL) - Piotroski F-Score Analysis for Year 2023 (Final Score: 7/9)

In-depth Piotroski F-Score Analysis of Tyler Technologies (TYL) for 2023. Final Piotroski Score: 7/9, indicating strong financial health and operational efficiency.

Short Analysis - Piotroski Score: 7

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

Tyler Technologies (TYL) scored 7 out of 9 on the Piotroski F-Score, indicating a strong financial position. Key positive criteria include consistent positive net income over 20 years, increasing cash flow from operations, a slight improvement in return on assets, a higher operating cash flow compared to net income, decreased leverage, increased gross margin, and improved asset turnover ratio. However, the current ratio has fallen, and there has been an increase in outstanding shares, which indicates potential liquidity concerns and shareholder value dilution.

Insights for Value Investors Seeking Stable Income

Tyler Technologies (TYL) appears to be a strong company with generally positive financial health and operational efficiency, as evidenced by its high Piotroski F-Score. However, potential investors should be wary of its decreasing current ratio and rising number of outstanding shares, which could signal liquidity issues and shareholder dilution. Overall, considering its robust operational efficiency and profitability trends, TYL is worth looking into, but careful attention should be paid to its liquidity and share issuance practices.

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

Profitability of Tyler Technologies (TYL)

Company has a positive net income?

Net income is a key profitability metric that shows how much of the revenue remains as profit after accounting for all expenses. A positive net income typically indicates that a company is financially healthy.

For Tyler Technologies (TYL), the net income in 2023 is $165,919,000, which is indeed positive. When considering the last 20 years, TYL has consistently posted positive net income every year. Notably, the net income has grown substantially from $26,402,000 in 2003 to the current $165,919,000 in 2023. This continuous increase not only earns TYL 1 point on the Piotroski F-score for this criterion but also suggests a generally positive trend in profitability over the long term. Such sustained profitability highlights the company's strong operational efficiencies and competitiveness, underpinning investor confidence.

Company has a positive cash flow?

Check if CFO 380440000 in 2023 are positive or negative. If the CFO is positive add 1 point if not set it to 0.

For Tyler Technologies (TYL), the Cash Flow from Operations (CFO) for the year 2023 is $380,440,000, which is indeed positive. Therefore, it earns 1 point in this criterion. Additionally, when we look at the historical data for the past 20 years, we observe a consistent upward trend in CFO values starting from $22,535,000 in 2003 to the current figure. This indicates strong liquidity and operational efficiency over an extended period. TYL's positive CFO and sustained growth in operating cash flow support its financial health and capability to generate cash from core business activities.

Return on Assets (ROA) are growing?

ROA (Return on Assets) measures how profitable a company is relative to its total assets. An increase in ROA indicates improved efficiency in generating profit from assets.

For Tyler Technologies (TYL), the ROA increased from 0.0349 in 2022 to 0.0354 in 2023, indicating that they have become slightly more efficient in using their assets to generate earnings. This is a positive trend, albeit a small increase. The increased ROA warrants a 1-point addition based on the Piotroski F-Score criteria. However, it’s important to note that the figure is significantly lower than the industry's median ROA, which was 0.6354 in 2022 and 0.6741 in 2023. While TYL's ROA trend is upward, there is still a considerable gap when compared to industry standards, which suggests room for improvement.

Operating Cashflow are higher than Netincome?

The Piotroski Score evaluates the financial strength of a company, one criterion being whether operating cash flow is higher than net income. This indicates strong profitability and cash generation.

In 2023, Tyler Technologies exhibits an operating cash flow of USD 380.44 million, which significantly surpasses its net income of USD 165.92 million. This results in adding 1 point to the Piotroski Score. Historically, the company's operating cash flow has shown a robust upward trend, reaching its highest levels in recent years. On the contrary, net income has grown at a slower pace but remains positive. This favorable cash flow trend underscores Tyler Technologies' strong operational efficiency and ability to generate cash, suggesting it is in a healthy financial position.

Liquidity of Tyler Technologies (TYL)

Leverage is declining?

Leverage examines the extent to which a company is financing its operations through debt. Lower leverage often indicates financial stability.

In 2022, Tyler Technologies had a leverage ratio of 0.2145, which decreased to 0.136 in 2023. Although this seems beneficial at first glance, historical data reveal fluctuations wherein leverage dropped to zero multiple times over the last 20 years. The most recent drop marks a significant decline from 0.2848 in 2021. Therefore, while leverage decreased in the short term, the frequent historical spikes suggest volatility in Tyler's debt management strategy. Despite these trends, the decline from 2022 to 2023 generally reflects improved financial stability, thus earning 1 Piotroski point.

Current Ratio is growing?

Compare the Current Ratio of 0.8596 in 2023 with the Current Ratio of 0.9523 in 2022 and check if Current Ratio increased or decreased.

The Current Ratio for Tyler Technologies (TYL) has decreased in 2023 (0.8596) compared to 2022 (0.9523). This is a decrease by approximately 9.73%. The Current Ratio is a critical measure of a company's capability to settle its short-term liabilities with its short-term assets. While a ratio above 1 is often ideal, indicating that the firm has more current assets than liabilities, TYL's ratio has trailed not only below 1 for the past two years but also has fallen further in 2023. Over the past 20 years, TYL's Current Ratio hit a peak in 2018 (1.9726) and saw the lowest value in 2008 (0.7509). Historically, TYL has usually stayed around or below the industry median, which consistently ranged between 1.4 to 1.8. Both in 2022 and 2023, TYL has been significantly below the industry median, indicating potential liquidity concerns for the company. Based on this criterion, the point allocation remains 0 as the Current Ratio has not increased in 2023.

Number of shares not diluted?

Change in shares outstanding refers to the difference in the number of shares a company has issued at two different points in time. It is important because issuing more shares can dilute the ownership of existing shareholders.

The outstanding shares for Tyler Technologies (TYL) have increased from 41,544,000 in 2022 to 42,024,000 in 2023. This signifies a growth of approximately 480,000 shares. In the context of Piotroski Analysis, we would assign a score of 0 here because an increase in outstanding shares means potential dilution of shareholder value. Over a longer timeline, according to the historical data provided, Tyler Technologies has shown varying trends in its number of outstanding shares. For instance, the outstanding shares peaked in 2003 at 45,035,000, saw a gradual decline to around 32,916,000 shares in 2012, and have fluctuated upwards in the recent decade. Nonetheless, the one-year change from “year ended December 30, 2022” to 42,024,000 in 2023 does not favor the positive metric sought in Piotroski scoring.

Operating of Tyler Technologies (TYL)

Cross Margin is growing?

The gross margin criterion assesses the percentage of revenue that exceeds the cost of goods sold. It is critical as it indicates the core profitability of the company's operations.

Tyler Technologies saw an improvement in its gross margin from 0.4237 in 2022 to 0.4412 in 2023, registering a growth of 0.0175 or 4.13%. This upward trend in gross margin is a positive sign, reflecting enhanced operational efficiency. Over the last two decades, Tyler's gross margin has generally trailed the industry median, which illustrates a persistent struggle to align with broader industry profitability norms. However, the boost in 2023 indicates promising strides towards better profitability, earning Tyler Technologies a point for this criterion in Piotroski's analysis.

Asset Turnover Ratio is growing?

Change in Asset Turnover gives insights into how efficiently the company is using its assets to generate sales, indicating operational efficiency.

For Tyler Technologies (TYL), the Asset Turnover ratio has improved from 0.3928 in 2022 to 0.4169 in 2023. This indicates a positive trend in operational efficiency. Over the past two decades, the ratio peaked above 1.11 and has seen a decline starting from 2013. The recent increase to 0.4169 though still markedly lower than the highs of the past, suggests a stabilization or potential rebound, meriting 1 point according to the Piotroski criteria.