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ABB Ltd (NYSE:ABB)
Piotroski F-Score
5 (As of Today)

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

ABB Ltd has an F-score of 5 indicating the company's financial situation is typical for a stable company.

ABB' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 8
Current: 5

2
8

During the past 13 years, the highest Piotroski F-Score of ABB Ltd was 8. The lowest was 2. And the median was 6.


Definition

How is the Piotroski F-Score calculated?

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

This Year (Sep16) TTM:Last Year (Sep15) TTM:
Net Income was 204 + 500 + 406 + 568 = $1,678 Mil.
Cash Flow from Operations was 1994 + 252 + 1082 + 1081 = $4,409 Mil.
Revenue was 9242 + 7903 + 8677 + 8255 = $34,077 Mil.
Gross Profit was 2395 + 2358 + 2415 + 2459 = $9,627 Mil.
Average Total Assets from the begining of this year (Sep15)
to the end of this year (Sep16) was
(41768 + 41356 + 41814 + 42003 + 40809) / 5 = $41550 Mil.
Total Assets at the begining of this year (Sep15) was $41,768 Mil.
Long-Term Debt was $6,319 Mil.
Total Current Assets was $22,902 Mil.
Total Current Liabilities was $16,177 Mil.
Net Income was 680 + 564 + 588 + 577 = $2,409 Mil.

Revenue was 10346 + 8555 + 9165 + 8519 = $36,585 Mil.
Gross Profit was 2841 + 2501 + 2720 + 2518 = $10,580 Mil.
Average Total Assets from the begining of last year (Sep14)
to the end of last year (Sep15) was
(45778 + 44852 + 43135 + 42693 + 41768) / 5 = $43645.2 Mil.
Total Assets at the begining of last year (Sep14) was $45,778 Mil.
Long-Term Debt was $6,571 Mil.
Total Current Assets was $23,067 Mil.
Total Current Liabilities was $15,032 Mil.

Profitability

Question 1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

ABB Ltd's current net income (TTM) was 1,678. ==> Positive ==> Score 1.

Question 2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by total assets at the beginning of the year.

Score 1 if positive, 0 if negative.

ABB Ltd's current cash flow from operations (TTM) was 4,409. ==> Positive ==> Score 1.

Question 3. Change in Return on Assets

Compare this year’s return on assets (1) to last year’s return on assets.

Score 1 if it’s higher, 0 if it’s lower.

ABB Ltd's return on assets of this year was 0.0401743. ABB Ltd's return on assets of last year was 0.05262353. ==> Last year is higher ==> Score 0.

Question 4. Quality of Earnings (Accrual)

Compare Cash flow return on assets (2) to return on assets (1)

Score 1 if CFROA > ROA, 0 if CFROA <= ROA.

ABB Ltd's current net income (TTM) was 1,678. ABB Ltd's current cash flow from operations (TTM) was 4,409. ==> 4,409 > 1,678 ==> CFROA > ROA ==> Score 1.

Funding

Question 5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by average total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Sep16)=Long-Term Debt/Average Total Assets from Sep15 to Sep16
=6319/41550
=0.15208183

Gearing (Last Year: Sep15)=Long-Term Debt/Average Total Assets from Sep14 to Sep15
=6571/43645.2
=0.15055493

ABB Ltd's gearing of this year was 0.15208183. ABB Ltd's gearing of last year was 0.15055493. ==> Last year is lower than this year ==> Score 0.

Question 6. Change in Working Capital (Liquidity)

Compare this year’s current ratio (current assets divided by current liabilities) to last year’s current ratio.

Score 1 if this year'’s current ratio is higher, 0 if it’s lower

Current Ratio (This Year: Sep16)=Total Current Assets/Total Current Liabilities
=22902/16177
=1.41571367

Current Ratio (Last Year: Sep15)=Total Current Assets/Total Current Liabilities
=23067/15032
=1.53452634

ABB Ltd's current ratio of this year was 1.41571367. ABB Ltd's current ratio of last year was 1.53452634. ==> Last year's current ratio is higher ==> Score 0.

Question 7. Change in Shares in Issue

Compare the number of shares in issue this year, to the number in issue last year.

Score 0 if there is larger number of shares in issue this year, 1 otherwise.

ABB Ltd's number of shares in issue this year was 2139. ABB Ltd's number of shares in issue last year was 2223. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Question 8. Change in Gross Margin

Compare this year’s gross margin (gross profit divided by sales) to last year’s.

Score 1 if this year’s gross margin is higher, 0 if it’s lower.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=9627/34077
=0.28250726

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=10580/36585
=0.28918956

ABB Ltd's gross margin of this year was 0.28250726. ABB Ltd's gross margin of last year was 0.28918956. ==> Last year's gross margin is higher ==> Score 0.

Question 9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by total assets at the beginning of the year) to last year’s asset turnover ratio.

Score 1 if this year’s asset turnover ratio is higher, 0 if it’s lower

Asset Turnover (This Year)=Revenue (TTM)/Total Assets at the Beginning of This Year (Sep15)
=34077/41768
=0.81586382

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep14)
=36585/45778
=0.79918301

ABB Ltd's asset turnover of this year was 0.81586382. ABB Ltd's asset turnover of last year was 0.79918301. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+1+0+1+0+0+1+0+1
=5

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

ABB Ltd has an F-score of 5 indicating the company's financial situation is typical for a stable company.


Explanation

The developer of the system is Joseph D. Piotroski is relatively unknown accounting professor who shuns publicity and rarely gives interviews.

He graduated from the University of Illinois with a B.S. in accounting in 1989, received an M.B.A. from Indiana University in 1994. Five years later, in 1999, after earning a Ph.D. in accounting from the University of Michigan, he became an associate professor of accounting at the University of Chicago.

In 2000, he wrote a research paper called "Value Investing: The Use of Historical Financial Statement Information to Separate Winners from Losers" (pdf).

He wanted to see if he can develop a system (using a simple nine-point scoring system) that can increase the returns of a strategy of investing in low price to book (referred to in the paper as high book to market) value companies.

What he found was something that exceeded his most optimistic expectations.

Buying only those companies that scored highest (8 or 9) on his nine-point scale, or F-Score as he called it, over the 20 year period from 1976 to 1996 led to an average out-performance over the market of 13.4%.

Even more impressive were the results of a strategy of investing in the highest F-Score companies (8 or 9) and shorting companies with the lowest F-Score (0 or 1).

Over the same period from 1976 to 1996 (20 years) this strategy led to an average yearly return of 23%, substantially outperforming the average S&P 500 index return of 15.83% over the same period.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

ABB Ltd Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Question 1 1111111111
Question 2 1111111111
Question 3 1100010000
Question 4 1011111111
Question 5 1110100111
Question 6 1101001110
Question 7 0001010011
Question 8 1110100001
Question 9 1100010000
F-score 8755564566

ABB Ltd Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
Question 1 1111111111
Question 2 1111111111
Question 3 0000010000
Question 4 1111111111
Question 5 0111111100
Question 6 1111000000
Question 7 1111111111
Question 8 0000111100
Question 9 1000000101
F-score 6666676745
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