Last update on 2024-06-07

Woodward (WWD) - Piotroski F-Score Analysis for Year 2023 (Final Score: 8/9)

In-depth analysis of Woodward (WWD) using Piotroski F-Score for 2023, scoring 8/9. Evaluate financial health based on profitability, liquidity, and more.

Short Analysis - Piotroski Score: 8

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

Woodward (WWD) has been analyzed using the Piotroski F-Score, which evaluates a company's financial health based on profitability, liquidity, and operating efficiency. The company earned 8 out of 9 points. It demonstrated strong profitability with a positive net income of $232.368 million and growing ROA. The liquidity analysis showed stable but not significantly improved metrics, with a leverage increase slightly concerning but a high current ratio. The operating analysis revealed improving efficiency, with higher gross margins and increasing asset turnover. Overall, Woodward shows strong financial health with slightly mixed signals in liquidity.

Insights for Value Investors Seeking Stable Income

Woodward (WWD) appears to be a strong investment based on an 8 out of 9 Piotroski F-Score, which suggests it is a solid company with healthy financials, especially in terms of profitability and operational efficiency. Investors might find it a worthwhile consideration given its consistent positive performance and robust profit generation. However, potential investors should keep an eye on leverage and liquidity trends while conducting further due diligence.

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

Profitability of Woodward (WWD)

Company has a positive net income?

Net income is a key metric for assessing a company's profitability, which is crucial for determining its financial health and growth potential.

The net income for Woodward (WWD) in 2023 is positive, standing at $232.368 million. Historically, the company has consistently generated positive net income over the past 20 years, with only slight annual fluctuations. This positive trend indicates robust financial health and adds one point to the Piotroski score for profitability. In particular, seeing positive net income perpetually over two decades positions WWD strongly in terms of stable profit generation.

Company has a positive cash flow?

Cash Flow from Operations (CFO) checks if the business can generate sufficient cash to maintain and grow its operations, making it a crucial financial metric.

For 2023, Woodward (WWD) has reported a Cash Flow from Operations (CFO) of $308.543 million. This figure is positive, reflecting the company’s ability to generate sufficient operational cash flows, which is a good indicator of financial health and operational efficiency. Over the last 20 years, the CFO has varied but generally remained positive, with peaks and troughs. For instance, in 2016, it hit a high of $435.379 million, while it dropped to a low of $60.775 million in 2003. Despite these fluctuations, maintaining a positive CFO over a prolonged period demonstrates robust financial management. Thus, for 2023, a positive CFO translates to an added point in the Piotroski score, showcasing a commendable fiscal stance.

Return on Assets (ROA) are growing?

Return on Assets (ROA) assesses a company's efficiency in generating profits from its assets. It is a key measure of overall profitability and how effectively management is using the company's assets to create earnings.

Woodward's (WWD) ROA increased from 0.0435 in 2022 to 0.0595 in 2023, signalling an improvement in profitability and efficiency. This increase is commendable, as it indicates the company significantly improved its earnings relative to its asset base. However, the company's ROA still lags behind the industry median ROA, which stood at 0.2484 in 2023. This suggests that while WWD is on an upward trend, it has room to enhance efficiency further to match or surpass industry standards. Moreover, analyzing historical figures, WWD's ROA has generally been below the industry median over the past 20 years, showcasing persistent inefficiency challenges that management will need to address to sustain long-term growth.

Operating Cashflow are higher than Netincome?

This criterion compares a company's Operating Cash Flow (OCF) with its Net Income to evaluate earnings quality. If OCF is higher than Net Income, it indicates high-quality earnings, as it suggests cash income rather than accounting income with non-cash items.

For Woodward (WWD) in 2023, the Operating Cash Flow (OCF) is $308.54 million, while the Net Income is $232.37 million. Since OCF is higher than Net Income by $76.17 million, Woodward earns a point based on this criterion. This is a positive sign indicating that Woodward's earnings are of high quality, reflecting robust cash generation capabilities rather than inflated earnings through accounting measures. Historical data supports the trend, showing OCF consistently higher than Net Income across most years, particularly in 2020 when OCF was $349.49 million, significantly higher than the Net Income of $240.39 million, highlighting sustainable operational efficiency.

Liquidity of Woodward (WWD)

Leverage is declining?

Comparison of leverage year over year assesses whether a company is decreasing its debt relative to its equity, aiding in risk assessment.

For Woodward (WWD), the leverage ratio increased from 0.1662 in 2023 compared to 0.1921 in 2022. Over the past 20 years, WWD's leverage has fluctuated significantly, reaching its peak in 2009 at 0.3105 and its lowest point in 2008 at 0.036. This increase in leverage from 2022 to 2023 implies higher financial risk for the company, given that it is more reliant on debt financing. Historically, WWD has managed to reduce leverage after peaks, as observed in 2010 and 2018. However, the leverage trend against recent years suggests a cautious approach as increasing leverage could negatively impact financial flexibility and increase vulnerability to economic fluctuations. Hence, the result for this criterion is 0 points as the leverage did not decrease.

Current Ratio is growing?

The Current Ratio measures a company's ability to pay short-term obligations with its current assets. A higher ratio indicates better liquidity. Generally, a ratio above 1 signifies that the company has more current assets than current liabilities.

Comparing Woodward's (WWD) Current Ratio from 2022 (2.4336) to 2023 (2.3809), there's a slight decrease (approximately 2.17%). Thus, it results in 0 points for this criteria. This decrease, although modest, indicates a slight reduction in liquidity. However, it remains well above the industry median of 2.1805 in 2023, signifying it still maintains a strong liquidity position relative to its peers. Historically, Woodward’s Current Ratio has shown fluctuation but mostly remained above 2, except for a dip in 2018. Such consistency denotes solid financial health, attributable to effective management of short-term assets and liabilities.

Number of shares not diluted?

Change in Shares Outstanding reflects potential dilution and management's confidence in its financial health.

Examining Woodward's outstanding shares, there's a notable decrease from 61,517,000 in 2022 to 59,908,000 in 2023, translating to a reduction of 1,609,000 shares. Over two decades, Woodward's share count fell from 68,334,000 in 2003 to 59,908,000 in 2023. This decreasing trend suggests that Woodward's management is either repurchasing shares or not issuing new shares, indicating potentially strong financial health. As the outstanding shares decreased in 2023, according to the Piotroski Score, Woodward earns 1 point for this criterion.

Operating of Woodward (WWD)

Cross Margin is growing?

Gross margin is the percentage of revenue that exceeds the cost of goods sold, a key metric of profitability and efficiency.

Comparing Woodward's (WWD) gross margin from 2022 (0.2205) to 2023 (0.2325), we see an increase, indicating improved profitability. The increase from 0.2205 to 0.2325 is a positive trend, adding 1 point in the Piotroski analysis. Historically, Woodward's gross margins have seen fluctuations, peaking in 2007 at 0.3008 and being above the industry median of 0.2454. Recently, they dipped to 0.2205 in 2022 before recovering to 0.2325 in 2023, yet still below the industry's 0.2484 median. This trend showcases a turnaround and efficiency improvements within Woodward, highlighting a competitive stance.

Asset Turnover Ratio is growing?

Asset turnover evaluates how efficiently a company uses its assets to generate sales. An increasing ratio is a positive signal.

For fiscal year 2023, Woodward (WWD) reported an asset turnover ratio of 0.7457, marking a significant climb from the previous year’s 0.6034. This enhancement translates to a heightened efficiency in asset utilization, scoring 1. Over two decades, though the ratio peaked at 1.4324 in 2008, recent years show improvement post-2020 dip. This incremental rise augurs well for operational efficiency and grits admiration for WWD's strategic aptness.