Last update on 2024-06-07

World Acceptance (WRLD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 5/9)

World Acceptance (WRLD) Piotroski F-Score Analysis for 2023. Discover WRLD's financial health with a final score of 5/9 covering profitability, liquidity, and efficiency.

Short Analysis - Piotroski Score: 5

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

The Piotroski F-Score rates a company's financial health based on nine criteria out of a possible nine points. World Acceptance (WRLD) scored 5 out of 9, indicating a mixed financial health. Here's the breakdown - Positive aspects: The company has a positive net income ($21,231,990 in 2023), positive cash flow from operations ($291,553,786 in 2023), lower debt levels, and decreased the number of outstanding shares, suggesting shareholder value efforts. Negative aspects: The company is experiencing a decline in return on assets (ROA), a lower current ratio indicating declining liquidity, a drop in gross margin, and decreasing asset turnover ratio, indicating weakening efficiency and profitability. Additionally, while cash flow is strong and debt is reducing, other metrics indicate potential risks and struggles in adapting operational efficiencies consistently.

Insights for Value Investors Seeking Stable Income

Considering WRLD's Piotroski F-Score of 5, it shows mixed signals. While strong in certain areas like cash generation and debt management, concerns revolve around declining profitability metrics and liquidity issues. This score indicates that while WRLD might have some underlying strengths, the decline in key areas like ROA, gross margin, and asset turnover raises caution. As an investor, it may be worth exploring other companies with higher Piotroski scores and more consistent financial health. Nonetheless, if interested in WRLD, further detailed analysis and understanding the reasons behind the declining efficiency would be crucial 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 World Acceptance (WRLD)

Company has a positive net income?

Net income is the total profit of a company after all expenses and taxes are deducted from revenue. It is a crucial metric for assessing a company's profitability.

World Acceptance (WRLD) reported a net income of $21,231,990 for the year 2023, which is a positive figure, thus meeting the criterion and earning 1 point. Analyzing the trend, the net income has been on a decline since 2013 when it peaked at $104,089,748. This continuous decrease, particularly a sharp fall to $21,231,990 in 2023, raises concerns about the company's long-term profitability and operational efficiency despite the criterion being met this year.

Company has a positive cash flow?

The criterion involves assessing the Cash Flow from Operations (CFO). A positive CFO indicates that the company is generating enough cash from its core business operations, reflecting strong operational performance.

World Acceptance (WRLD) has a positive Cash Flow from Operations (CFO) of 291,553,786 in 2023. This is a positive trend and shows that the company is generating sufficient cash from its core operations. Historically, the company has shown a consistent upward trend in its CFO over the past 20 years, increasing from 55,142,562 in 2003 to the current 291,553,786 in 2023. This consistent growth suggests efficient operational management and a healthy business model.

Return on Assets (ROA) are growing?

This criterion examines whether the company’s return on assets (ROA) has improved from the previous year. A higher ROA indicates better efficiency in using assets to generate earnings, reflecting good management performance.

World Acceptance (WRLD) observed a decrease in its ROA from 0.0496 in 2022 to 0.0182 in 2023. When comparing this value to the industry median over the last 20 years, WRLD’s ROA has generally been below the industry median, reflecting a less efficient use of assets compared to its peers. The downtrend in ROA for 2023 reduces the Piotroski F-score by 1 point. It is noteworthy that despite fluctuations, the industry median ROA remains higher, emphasizing a need for WRLD to amplify operational efficiency. Given this trend, the evaluation for this criterion sets the score to 0.

Operating Cashflow are higher than Netincome?

The Operating Cash Flow criterion assesses whether a company's Operating Cash Flow is higher than its Net Income. This is important as it indicates the company's earnings quality, ensuring profits are not just accounting figures but are backed by actual cash flow.

For World Acceptance (WRLD) in 2023, the Operating Cash Flow stands at $291,553,786, significantly higher than the Net Income, which is $21,231,990. This translates to an additional point in the Piotroski score, suggesting strong earnings quality. Consistent trends over the past 20 years also demonstrate increasing Operating Cash Flow, from $55,142,562 in 2003 to $291,553,786 in 2023, outpacing net income figures and showing persistent positive cash flow trends, signaling a healthy operational cash generation capacity.

Liquidity of World Acceptance (WRLD)

Leverage is declining?

The Change in Leverage criterion examines how a company's leverage ratio has evolved from one year to the next. A decrease in leverage suggests the company is reducing its reliance on debt, potentially becoming financially healthier.

Comparing the leverage ratio of 0.6401 in 2022 to 0.6077 in 2023, it's clear that World Acceptance's leverage has decreased. This is positive, indicating a pivot towards lower dependence on debt. Hence, WRLD scores 1 point for this criterion. Evaluating historical data, Leverage typically fluctuated but not dramatically, indicating stability with trends of decreasing debt levels in recent years.

Current Ratio is growing?

The current ratio measures a company's capability to pay off its short-term liabilities with its short-term assets. A higher ratio indicates greater liquidity, which is considered favorable as it demonstrates financial stability and the ability to cover short-term obligations. An increase in the current ratio would suggest improving liquidity.

The current ratio for World Acceptance (WRLD) has dropped dramatically from 15.3382 in 2022 to 0 in 2023. This is a stark decline and indicates a severe deterioration in the company's liquidity position. Over the last 20 years, WRLD's current ratio has shown significant volatility, peaking massively at 583.6082 in 2018, but also recording low points close to zero in multiple years, e.g., 2004 and 2011, indicating a recurring pattern of liquidity challenges. Despite these fluctuations, the industry's median current ratio has been relatively stable, hovering around 1.4-1.5 in recent years. Thus, WRLD's current ratio of 0, comparing unfavorably with the industry median of 1.4517 in 2023, reflects inadequate liquidity and poses financial risk. This results in a score of 0 points for this criterion, signaling poor performance and a contraction in liquidity.

Number of shares not diluted?

Change in shares outstanding is essential as it indicates the company’s stock dilution or buyback activities, affecting shareholder value.

In 2023, World Acceptance (WRLD) had 5,749,492 outstanding shares, compared to 6,072,170 in 2022. This signifies a decrease in outstanding shares by 5.31%, adding 1 point for this positive move showing a potential buyback program. Historical data shows a trend of decreasing shares, benefiting existing shareholders by potentially enhancing EPS.

Operating of World Acceptance (WRLD)

Cross Margin is growing?

Gross Margin measures the proportion of revenue that exceeds the company's cost of goods sold. It reflects the core profitability of the business.

In 2023, World Acceptance (WRLD) exhibited a Gross Margin of 0.6308 compared to 0.7239 in 2022. This represents a decrease, indicating a drop in profitability from its core activities. Over the past 20 years, WRLD's gross margin has generally been more volatile than the industry median. The industry's gross margin stood higher than WRLD until 2011 but stabilized within more predictable ranges. WRLD's notable 2012 spike above industry levels unearths potential anomalies. A point cannot be awarded here since the gross margin of WRLD has unequivocally decreased from 2022 to 2023.

Asset Turnover Ratio is growing?

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

The Asset Turnover for World Acceptance (WRLD) has decreased from 0.5079 in 2022 to 0.4847 in 2023. This trend is not favorable as it indicates a declining efficiency in generating sales from its asset base. Over the past 20 years, the Asset Turnover has shown a declining trend from a high of 0.7601 in 2007 to the current level. Hence, for the criterion change in Asset Turnover, WRLD scores 0 points.