Last update on 2024-06-07

Olympic Steel (ZEUS) - Piotroski F-Score Analysis for Year 2023 (Final Score: 4/9)

In-depth Piotroski F-Score analysis of Olympic Steel (ZEUS) for 2023, assessing profitability, liquidity, and operating efficiency with a score of 4/9.

Short Analysis - Piotroski Score: 4

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

The analysis assesses Olympic Steel (ZEUS) using the Piotroski F-Score, examining a company's financial strength based on 9 criteria related to profitability, liquidity, and operational efficiency. For profitability, ZEUS has a positive net income and cash flow, but a declining return on assets. The operating cash flow surpasses the net income, indicating strong operational performance. In terms of liquidity, leverage has slightly increased, and the current ratio has decreased but remains above the industry median. The number of shares has increased, causing dilution. For operational efficiency, the gross margin has improved, but asset turnover has declined.

Insights for Value Investors Seeking Stable Income

With a Piotroski F-Score of 4 (out of 9), ZEUS shows mixed financial health: good profitability indicators, slightly concerning liquidity metrics, and mixed operational efficiency signals. Although some aspects like strong cash flow and gross margin are positive, the declining ROA, increasing leverage, and share dilution are potential red flags. Investors may want to consider these factors and conduct further research 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 Olympic Steel (ZEUS)

Company has a positive net income?

Net income is a critical measure of a company's profitability. The higher the net income, the better the company's profitability is.

In 2023, Olympic Steel (ZEUS) reported a net income of $44.529 million, which is positive. This signifies a profitable year for the company, warranting the addition of 1 point in the Piotroski score. Over the last 20 years, the company's net income has exhibited significant volatility, ranging from a nadir of -$61.228 million in 2009 to a peak of $121.051 million in 2021. Despite the fluctuations, the positive net income in 2023 is a good sign of financial health.

Company has a positive cash flow?

Cash Flow from Operations (CFO) is a measure of the cash generated or consumed by the company's regular operational activities.

In 2023, Olympic Steel (ZEUS) reported a CFO of $175,159,000, indicating a positive cash flow from its operating activities. This metric is crucial as it demonstrates the company's ability to generate sufficient cash flow to maintain and grow its operations. Historical data reveals fluctuations in CFO over the last 20 years, with negative values in several years, such as -$50,803,000 in 2006, -$39,584,000 in 2014, and -$146,374,000 in 2021.  Despite these periods of negative CFO, the trend in recent years, specifically 2022 and 2023, shows a strong recovery and improvement, with positive values of $185,853,000 and $175,159,000 respectively. This consistent positive CFO is a favorable sign, indicating robust operational performance and earning 1 point in the Piotroski Analysis.

Return on Assets (ROA) are growing?

Change in ROA: Compare the ROA in 2023 with the ROA in 2022. If the ROA increased in 2023, add 1 point, if not, set it to 0.

For Olympic Steel (ZEUS), the Return on Assets (ROA) metric decreased from 0.095 in 2022 to 0.0475 in 2023. This decline indicates a drop in the company's efficiency in generating profit from its assets, hence earning 0 points on this criterion. Looking at the historical data over the last 20 years, the ROA has shown variability: peaks, such as in 2005 with 0.2172, and troughs, such as in 2008 with 0.0174. Notably, after reaching a high of 0.2417 in 2020, the industry's median ROA has generally been trending downward but remains higher than ZEUS's ROA in 2023. Given these observations, the decline in ROA could signal internal inefficiencies or external pressures impacting performance.

Operating Cashflow are higher than Netincome?

Operating Cash Flow being higher than Net Income suggests that the company is generating sufficient cash from its core operations, which is a positive indicator of financial health.

In 2023, Olympic Steel reported an Operating Cash Flow of $175.16 million and a Net Income of $44.53 million. This is a positive trend as the company has been able to generate cash flow from its core operational activities that significantly surpasses its net income, adding 1 point to the Piotroski Score. Over the past 20 years, the company's Operating Cash Flow has been volatile but reached its peak in recent years, indicating improved operational efficiency.

Liquidity of Olympic Steel (ZEUS)

Leverage is declining?

Leverage measures a company's overall debt levels compared to its equity. Reducing leverage typically signals improved financial stability and reduced risk.

For Olympic Steel (ZEUS), leverage has increased from 0.2112 in 2022 to 0.2208 in 2023. This represents an upward trend in leveraging, indicating that the company has taken on more debt relative to its equity. When analyzing the last 20 years of data, it's worth noting that leverage has fluctuated significantly, with a peak at 0.3977 in 2018 and various points of reduction. However, the increase between 2022 and 2023 indicates the company may be gearing up for growth initiatives or covering operational cash flows, but it also poses more financial risks. This earns a score of 0 according to Piotroski's criteria as the company's leverage has not decreased.

Current Ratio is growing?

This metric evaluates the company's ability to cover its short-term liabilities with its short-term assets. A higher current ratio indicates better liquidity.

In the comparison between 2023 and 2022, Olympic Steel (ZEUS) has seen a decrease in its current ratio, falling from 3.9957 in 2022 to 3.3465 in 2023. This downward trend signifies a reduction in the company's capability to cover short-term liabilities with its current assets. Despite this drop, the 2023 current ratio of 3.3465 remains substantially above the industry median current ratio of 2.6748. Over the past 20 years, the company has consistently maintained current ratios significantly higher than the industry median. While the declining trend in the current ratio may raise some concerns, the robust liquidity position relative to industry standards suggests that Olympic Steel can still efficiently manage its short-term obligations. Hence, for this criterion based on the decline, we assign it 0 points.

Number of shares not diluted?

Change in shares outstanding measures whether the company is issuing or buying back its own shares. Increasing share count generally dilutes existing shareholders, while decreasing share count is often seen positively.

For Olympic Steel (ZEUS), the outstanding shares increased from 11,551,000 in 2022 to 11,573,000 in 2023. Therefore, the shares outstanding have increased, resulting in 0 points for this criterion. Over the last 20 years, the share count increased from 9,646,000 in 2003 to 11,573,000 in 2023, reflecting a long-term trend of gradual increase. This increase dilutes existing shareholder value and may be viewed negatively by investors.

Operating of Olympic Steel (ZEUS)

Cross Margin is growing?

Gross Margin compares gross profits with revenue. Assessing if it increases helps understand profitability efficiency.

The Gross Margin for Olympic Steel (ZEUS) has increased from 0.1899 in 2022 to 0.2194 in 2023, marking an improvement. Assigning 1 point. When examining the Gross Margin over the past 20 years, it's evident that the 2023 value is among the highest for the company. This improvement in gross margin indicates better cost control or enhanced pricing power. Considering the industry median of 0.1995 for 2023, Olympic Steel's figure of 0.2194 shows it is outperforming peers in terms of gross profitability. This positive trend enhances investor confidence, marking it as a good criterion in Piotroski's analysis.

Asset Turnover Ratio is growing?

The Change in Asset Turnover criterion focuses on evaluating how efficiently a company uses its assets to generate sales. Asset Turnover is calculated by dividing sales by total assets. An increase in this ratio indicates better efficiency in utilizing assets to generate revenue.

The Asset Turnover ratio for Olympic Steel (ZEUS) has decreased from 2.6733 in 2022 to 2.3002 in 2023. This represents a decline in efficiency, meaning the company has not managed to use its assets as effectively to generate sales in 2023 as it did in 2022. Consequently, we must assign 0 points for this criterion. Looking at the historical data, the company has experienced fluctuations in its Asset Turnover ratio over the last 20 years. Notably, the highest efficiency was observed in 2008 and 2021 with ratios of 2.853 and 2.7789 respectively, while the lowest was in 2009 at 1.288. The recent decrease should be a point of concern, highlighting a need for the management to optimize the asset utilization better. Despite the decrease, the ratio is still above the 20-year historical average, suggesting that while there's a decline, it isn't indicative of a catastrophic inefficiency.