Last update on 2024-06-06

VF (VFC) - Piotroski F-Score Analysis for Year 2023 (Final Score: 3/9)

Analyze VF Corporation (VFC) Piotroski F-Score of 3/9 for 2023. Understand profitability, liquidity, operating efficiency, and financial health trends.

Short Analysis - Piotroski Score: 3

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

The Piotroski F-Score is a metric that grades a company on its financial health using 9 criteria related to profitability, liquidity, and operational efficiency, with a maximum score of 9. VF Corporation (VFC) scored just 3 out of 9. 1. Profitability: VFC has a positive net income for 2023, scoring 1 point. However, it has a negative cash flow and declining return on assets, so no points were earned there, resulting in a mixed picture for profitability. 2. Liquidity: The company has shown increased leverage raising concern, but has also improved its current ratio and reduced the number of outstanding shares. This earns it 2 points in the liquidity section. 3. Efficiency: Both gross margin and asset turnover decreased, showcasing diminishing operational efficiency, thus earning no points in these parameters.

Insights for Value Investors Seeking Stable Income

Based on the current analysis, VF Corporation appears to be struggling with maintaining operational efficiency and cash flow despite its positive net income and improved liquidity ratios. It scored a total of 3 out of 9 on the Piotroski F-Score, which indicates it is a financially weak company at the moment. Potential investors may want to approach this stock with caution. It might be worth investigating further or considering other investment opportunities.

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

Profitability of VF (VFC)

Company has a positive net income?

Piotroski evaluates Net income to see if a company is profitable. A positive net income is a fundamental sign of financial health, adding credibility to the firm's operational efficiency and earning capability.

For the year 2023, VF Corporation (VFC) has reported a positive net income of $118,584,000. This results in earning 1 point in the Piotroski analysis. Historically, the company has shown varying net income figures, with a significant peak of $1,386,941,000 in 2021 and a decline to $118,584,000 in 2023. Despite the drop, maintaining a positive net income is a favorable indicator, demonstrating the firm’s ability to generate earnings even in fluctuating market conditions.

Company has a positive cash flow?

Cash Flow from Operations (CFO) indicates the cash a company generates from its regular business operations. Positive CFO suggests that a company can maintain and grow its operations through the cash generated by its core activities, which is crucial for long-term sustainability.

In 2023, VF Corporation reported a negative CFO of -655,795,000. This is a stark contrast to its historical performance, where it has usually reported positive cash flows. Over the last 20 years, the company consistently maintained positive CFO values, with peaks in 2013 (1,506,041,000) and 2018 (1,664,223,000). The recent negative CFO might indicate operational challenges or increased expenditure that are not being offset by revenue. Such a trend is concerning, as it suggests the company may struggle to fund its operations and growth without external financing. Therefore, for this Piotroski criterion, VF Corporation scores 0 points.

Return on Assets (ROA) are growing?

The criterion for the change in Return on Assets (ROA) compares the ROA of the company in the current year with the previous year. An increase indicates better asset utilization to generate profits.

In 2023, VFC's ROA was 0.0087, a significant drop from 0.1024 in 2022. This drastic decline suggests that the company's efficiency in using its assets to generate profits has deteriorated over the past year. As per the Piotroski criterion, since ROA has decreased, VFC scores 0 points for this section. This weak performance in ROA can be concerning for investors, especially when contrasted with the industry median ROA, which was much higher at around 0.5464 for the same period. Historically, VFC has shown much stronger ROA figures, even reaching ROA values over 0.1 in several past years. The current anomaly might indicate broader issues in operational efficiency or market conditions impacting profitability.

Operating Cashflow are higher than Netincome?

This measures whether cash generated from operations exceeds net income. It is a key indicator of earnings quality.

For 2023, VF Corporation's (VFC) operating cash flow is -$655.80 million while its net income stands at $118.58 million. This means that the operating cash flow is significantly lower than the net income, resulting in 0 points for this criterion. Over the past 20 years, VF demonstrated generally healthy cash flow from operations, often exceeding net income. However, 2023 marks a significant deviation with operating cash flow turning negative. This may indicate underlying operational challenges or transient issues such as strategic investments or economic impacts, which need further scrutiny to understand if this trend signifies temporary hardships or a more persistent issue. It is essential to monitor how VF plans to navigate these cash flow struggles moving forward.

Liquidity of VF (VFC)

Leverage is declining?

Change in Leverage is critical for understanding the company's financial risk and operational effectiveness, as it reflects the proportion of debt used.

Leverage has increased from 0.4203 in 2022 to 0.492 in 2023. This upward trend indicates a higher reliance on debt finance. Over a 20-year period, leverage varied, demonstrating the company's strategic shifts in financial structuring. Initially low at 0.1436 in 2015, it saw an uptick in recent years, peaking in 2023.

Current Ratio is growing?

The Current Ratio is a crucial financial metric that measures a company's ability to pay off its short-term liabilities with its short-term assets. A higher ratio indicates better short-term financial health.

In the case of VF (VFC), the Current Ratio increased from 1.3839 in 2022 to 1.4532 in 2023. This uptick in the Current Ratio earns a Piotroski score of 1 for the criterion, indicating an improvement in the company's ability to cover its short-term obligations. Historically, VF's Current Ratio has seen fluctuations, with notable values like 2.4978 in 2015 and a dip to 1.3839 in 2022. Compared to the industry median, VF's Current Ratio is slightly below the average of 1.64 in 2023 but has shown improvement from the previous year.

Number of shares not diluted?

A decrease in outstanding shares is typically a positive indicator, implying share buybacks by the company. This can signal management's confidence in the firm's future and can lead to higher earnings per share (EPS) for investors.

In 2022, VF Corp (VFC) had 390,291,000 outstanding shares which decreased to 387,763,000 in 2023. This represents a decline of 2,528,000 shares or approximately 0.65%. Given this reduction, it is considered favorable based on the Piotroski Score criteria, earning the company 1 point in this category. Analyzing the last 20 years of data reveals a general downward trend in the number of outstanding shares (e.g., from 438,443,213 in 2003 to 387,763,000 in 2023). This historical pattern of share reduction is often viewed as a positive indicator for long-term investors, suggesting a consistent approach by the company toward enhancing shareholder value via buybacks.

Operating of VF (VFC)

Cross Margin is growing?

Gross Margin represents the percentage of revenue that exceeds the cost of goods sold. It indicates the efficiency of a company in managing its production costs, which is crucial for profitability and competitiveness.

VF's Gross Margin has decreased from 0.5451 in 2022 to 0.525 in 2023. This represents a decline and thus scores 0 points in the Piotroski analysis. Over the last 20 years, VF's Gross Margin has fluctuated, peaking at 0.5528 in 2020, and generally outperforming the industry median. This decrease may raise concerns regarding VF's ability to maintain cost efficiency and profitability. Tracking the shift from 0.5451 to 0.525 shows deteriorating margins, which could be attributed to increased production costs or competitive pressures within the industry.

Asset Turnover Ratio is growing?

The Asset Turnover ratio is a financial metric that measures the efficiency of a company's use of its assets to generate sales revenue. It is calculated by dividing net sales by total assets. This ratio is critical because it provides insight into how well the company is utilizing its assets to produce revenue, which is a key indicator of operational efficiency and performance.

In the case of VF Corporation (VFC), the Asset Turnover ratio has decreased from 0.8741 in 2022 to 0.8497 in 2023. In other words, the company's efficiency in utilizing its assets to generate revenue has slightly declined. Considering the numbers, this represents a minor decrease of approximately 2.8%. This trend is not favorable as it indicates some decline in operational efficiency. Notably, compared to the Asset Turnover ratio of 1.3814 in 2017, VF's efficiency utilization has shown a downward trajectory in recent years, fluctuating considerably from 0.9935 in 2018, 0.9761 in 2019, 0.7425 in 2020, and recovering somewhat in 2021 and 2022 before the decline in 2023. Despite short-term rebounds, this signifies broader, longer-term challenges in asset efficiency. As such, VF should investigate the factors causing this decrease and strategize how to effectively manage its assets to enhance revenue generation moving forward. Since the Asset Turnover has decreased in 2023, no point would be added based on this criterion.