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Arch Capital Group Ltd (NAS:ACGL)
Piotroski F-Score
4 (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

Arch Capital Group Ltd has an F-score of 4 indicating the company's financial situation is typical for a stable company.

ACGL' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 7
Current: 4

3
7

During the past 13 years, the highest Piotroski F-Score of Arch Capital Group Ltd was 7. The lowest was 3. And the median was 5.


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 own currency.

This Year (Dec15) TTM:Last Year (Dec14) TTM:
Net Income was 283.336 + 115.79 + 80.033 + 58.579 = $538 Mil.
Cash Flow from Operations was 85.461 + 299.738 + 422.38 + 190.327 = $998 Mil.
Revenue was 1082.344 + 1019.652 + 932.59 + 902.004 = $3,937 Mil.
Gross Profit was 1082.344 + 1019.652 + 932.59 + 902.004 = $3,937 Mil.
Average Total Assets from the begining of this year (Dec14)
to the end of this year (Dec15) was
(22006.081 + 22849.68 + 23084.925 + 23770.592 + 23177.27) / 5 = $22977.7096 Mil.
Total Assets at the begining of this year (Dec14) was $22,006 Mil.
Long-Term Debt was $1,322 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 Mil.
Net Income was 182.5 + 208.016 + 228.675 + 215.164 = $834 Mil.

Revenue was 946.231 + 1035.66 + 992.531 + 1014.451 = $3,989 Mil.
Gross Profit was 946.231 + 1035.66 + 992.531 + 1014.451 = $3,989 Mil.
Average Total Assets from the begining of last year (Dec13)
to the end of last year (Dec14) was
(19566.094 + 21800.358 + 22573.515 + 22610.685 + 22006.081) / 5 = $21711.3466 Mil.
Total Assets at the begining of last year (Dec13) was $19,566 Mil.
Long-Term Debt was $891 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 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.

Arch Capital Group Ltd's current net income (TTM) was 538. ==> 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.

Arch Capital Group Ltd's current cash flow from operations (TTM) was 998. ==> 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.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Dec14)
=537.738/22006.081
=0.02443588

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec13)
=834.355/19566.094
=0.0426429

Arch Capital Group Ltd's return on assets of this year was 0.02443588. Arch Capital Group Ltd's return on assets of last year was 0.0426429. ==> 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.

Arch Capital Group Ltd's current net income (TTM) was 538. Arch Capital Group Ltd's current cash flow from operations (TTM) was 998. ==> 998 > 538 ==> 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: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=1321.74/22977.7096
=0.0575227

Gearing (Last Year: Dec14)=Long-Term Debt/Average Total Assets from Dec13 to Dec14
=891.141/21711.3466
=0.04104494

Arch Capital Group Ltd's gearing of this year was 0.0575227. Arch Capital Group Ltd's gearing of last year was 0.04104494. ==> 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: Dec15)=Total Current Assets/Total Current Liabilities
=0/0
=

Current Ratio (Last Year: Dec14)=Total Current Assets/Total Current Liabilities
=0/0
=

Arch Capital Group Ltd's current ratio of this year was . Arch Capital Group Ltd's current ratio of last year was . ==> 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.

Arch Capital Group Ltd's number of shares in issue this year was 126. Arch Capital Group Ltd's number of shares in issue last year was 134.9. ==> 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
=3936.59/3936.59
=1

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=3988.873/3988.873
=1

Arch Capital Group Ltd's gross margin of this year was 1. Arch Capital Group Ltd's gross margin of last year was 1. ==> 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 (Dec14)
=3936.59/22006.081
=0.17888646

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec13)
=3988.873/19566.094
=0.2038666

Arch Capital Group Ltd's asset turnover of this year was 0.17888646. Arch Capital Group Ltd's asset turnover of last year was 0.2038666. ==> Last year's asset turnover is higher ==> Score 0.

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+0
=4

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

Arch Capital Group Ltd has an F-score of 4 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 own currency.

Arch Capital Group Ltd Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Question 1 1111111111
Question 2 1111111111
Question 3 1001001110
Question 4 1111011111
Question 5 1110011010
Question 6 0000000000
Question 7 0111111111
Question 8 0000000000
Question 9 0001001010
F-score 5556357574

Arch Capital Group Ltd Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
Question 1 1111111111
Question 2 1111111111
Question 3 1011111000
Question 4 1111101111
Question 5 0000111000
Question 6 0000000000
Question 7 1001111111
Question 8 0000000000
Question 9 0011100000
F-score 5356756444
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