What do we know about the financial health trend at Ultra Electronics Holdings?

What do we know about the financial health trend at Ultra Electronics Holdings?

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At a time when the outlook for many firms is uncertain, it’s harder than ever to know the difference between a business in decline and one that’s on a solid footing. But with the assistance of a financial checklist called the Piotroski F-Score, there is a way of finding the clues in company accounts. 

So what is the F-Score and how does Ultra Electronics Holdings rate against it?

The F-Score works by looking back over a company’s previous financial statements to find the most important signs of strength or weakness. Its power lies in the analysis of 9 important financial measures that are useful in detecting firms with an improving health trend. The higher the score out of 9, the better.

Ultra Electronics Holdings has a Piotroski F-Score of 9 - signalling that it's towards the top of the range of this quality-focused accounting checklist. Here's what the checklist looks for...

In search of quality

The F-Score was introduced to the world in 2000 by an accounting professor at Stanford University called Joseph Piotroski. He used it to find cheaply-priced value stocks that were recovering. But his checklist was quickly embraced by analysts and fund managers as a go-to test of any company’s quality.

Piotroski's nine checks focus on three key areas of financial analysis:

Profitability - the F-Score looks at operating profits, cash flow and earnings quality to see if the business can sustain itself and even pay dividends. 

Capital structure - these checks look for any red flags over the health of the balance sheet, including debt and share issuance.

Operating efficiency - the F-Score looks for positive trends in gross margins and asset turnover.

Check the health of any stock

Overall, Piotroski’s F-Score is a useful checklist for investors looking for an instant assessment of a company’s financial health trend. High F-Scores may point to firms that are strong, stable and profitable, with the potential to deliver predictable returns. 

This assessment of fundamental health won’t always provide protection from trouble, but for those looking for a way of assessing the trends in a company’s financial track record, the F-Score could be a helpful place to start.

What does this mean for potential investors?

Ultra Electronics Holdings has an F-Score that suggests it could be a promising investment candidate worthy of further research - but it's only a first step. Higher F-Score stocks can still have weaknesses and may trade at premium prices compared to other stocks. We've identified some areas of concern with Ultra Electronics Holdings that you can find out about here.

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