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GuruFocus has detected 10 Warning Signs with American Electric Power Co Inc $AEP.
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American Electric Power Co Inc (NYSE:AEP)
Piotroski F-Score
6 (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

American Electric Power Co Inc has an F-score of 6 indicating the company's financial situation is typical for a stable company.

AEP' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 7
Current: 6

4
7

During the past 13 years, the highest Piotroski F-Score of American Electric Power Co Inc was 7. The lowest was 4. 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 local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 501.2 + 502.1 + -765.8 + 373.4 = $611 Mil.
Cash Flow from Operations was 799.9 + 925.9 + 1695.2 + 1100.8 = $4,522 Mil.
Revenue was 4044.9 + 3892.9 + 4652.2 + 3790.1 = $16,380 Mil.
Gross Profit was 2637.9 + 2583.3 + 2998.1 + 2430.5 = $10,650 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(61683.1 + 62486.5 + 63317.1 + 61442 + 63467.7) / 5 = $62479.28 Mil.
Total Assets at the begining of this year (Dec15) was $61,683 Mil.
Long-Term Debt was $17,378 Mil.
Total Current Assets was $6,034 Mil.
Total Current Liabilities was $9,498 Mil.
Net Income was 629.2 + 430 + 518.3 + 469.6 = $2,047 Mil.

Revenue was 4580.4 + 3826.7 + 4431.4 + 3614.7 = $16,453 Mil.
Gross Profit was 2790.8 + 2470.6 + 2744.7 + 2338.9 = $10,345 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(59544.6 + 60038 + 60938 + 61099 + 61683.1) / 5 = $60660.54 Mil.
Total Assets at the begining of last year (Dec14) was $59,545 Mil.
Long-Term Debt was $17,741 Mil.
Total Current Assets was $4,072 Mil.
Total Current Liabilities was $7,109 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.

American Electric Power Co Inc's current net income (TTM) was 611. ==> 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.

American Electric Power Co Inc's current cash flow from operations (TTM) was 4,522. ==> 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 (Dec15)
=610.9/61683.1
=0.00990385

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=2047.1/59544.6
=0.03437927

American Electric Power Co Inc's return on assets of this year was 0.00990385. American Electric Power Co Inc's return on assets of last year was 0.03437927. ==> 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.

American Electric Power Co Inc's current net income (TTM) was 611. American Electric Power Co Inc's current cash flow from operations (TTM) was 4,522. ==> 4,522 > 611 ==> 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: Dec16)=Long-Term Debt/Average Total Assets from Dec15 to Dec16
=17378.4/62479.28
=0.27814661

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=17740.9/60660.54
=0.29246195

American Electric Power Co Inc's gearing of this year was 0.27814661. American Electric Power Co Inc's gearing of last year was 0.29246195. ==> This year is lower or equal to last year. ==> Score 1.

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: Dec16)=Total Current Assets/Total Current Liabilities
=6033.9/9498
=0.63528111

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=4072.4/7108.5
=0.57289161

American Electric Power Co Inc's current ratio of this year was 0.63528111. American Electric Power Co Inc's current ratio of last year was 0.57289161. ==> This year's current ratio is higher. ==> Score 1.

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.

American Electric Power Co Inc's number of shares in issue this year was 491.7. American Electric Power Co Inc's number of shares in issue last year was 490.6. ==> There is larger number of shares in issue this year. ==> Score 0.

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
=10649.8/16380.1
=0.65016697

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=10345/16453.2
=0.62875307

American Electric Power Co Inc's gross margin of this year was 0.65016697. American Electric Power Co Inc's gross margin of last year was 0.62875307. ==> This year's gross margin is higher. ==> Score 1.

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 (Dec15)
=16380.1/61683.1
=0.26555248

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=16453.2/59544.6
=0.27631725

American Electric Power Co Inc's asset turnover of this year was 0.26555248. American Electric Power Co Inc's asset turnover of last year was 0.27631725. ==> 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+1+1+0+1+0
=6

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

American Electric Power Co Inc has an F-score of 6 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.

American Electric Power Co Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 1100101110
Question 4 1111111111
Question 5 0011110101
Question 6 0110011011
Question 7 0000000000
Question 8 0010010011
Question 9 1100100100
F-score 5664665666

American Electric Power Co Inc Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 1100011100
Question 4 1111111111
Question 5 1110000111
Question 6 0001110011
Question 7 0000000000
Question 8 0001111111
Question 9 1110000000
F-score 6655565666
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