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GuruFocus has detected 2 Warning Signs with Allergan PLC $AGN.
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Allergan PLC (NYSE:AGN)
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

Allergan PLC has an F-score of 6 indicating the company's financial situation is typical for a stable company.

AGN' s Piotroski F-Score Range Over the Past 10 Years
Min: 1   Max: 8
Current: 6

1
8

During the past 13 years, the highest Piotroski F-Score of Allergan PLC was 8. The lowest was 1. 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 (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 255.7 + -501.7 + 15220 + -0.6 = $14,973 Mil.
Cash Flow from Operations was 1218.5 + 1382.5 + -1092.4 + -83.3 = $1,425 Mil.
Revenue was 3795.9 + 3684.8 + 3622.2 + 3864.3 = $14,967 Mil.
Gross Profit was 2984.1 + 3243.3 + 3160 + 3384.6 = $12,772 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(135583.3 + 136073.7 + 132619.1 + 143607.7 + 128986.3) / 5 = $135374.02 Mil.
Total Assets at the begining of this year (Dec15) was $135,583 Mil.
Long-Term Debt was $29,971 Mil.
Total Current Assets was $17,858 Mil.
Total Current Liabilities was $7,875 Mil.
Net Income was -512 + -243.1 + 5301.2 + -630.9 = $3,915 Mil.

Revenue was 2562.6 + 3628.7 + 3469.5 + 3606.9 = $13,268 Mil.
Gross Profit was 1542.5 + 2710.9 + 2759.2 + 3005.1 = $10,018 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(52758 + 139460.7 + 138411.1 + 142816.3 + 135583.3) / 5 = $121805.88 Mil.
Total Assets at the begining of last year (Dec14) was $52,758 Mil.
Long-Term Debt was $40,134 Mil.
Total Current Assets was $8,579 Mil.
Total Current Liabilities was $8,292 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.

Allergan PLC's current net income (TTM) was 14,973. ==> 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.

Allergan PLC's current cash flow from operations (TTM) was 1,425. ==> 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)
=14973.4/135583.3
=0.1104369

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=3915.2/52758
=0.07421055

Allergan PLC's return on assets of this year was 0.1104369. Allergan PLC's return on assets of last year was 0.07421055. ==> This year is higher. ==> Score 1.

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.

Allergan PLC's current net income (TTM) was 14,973. Allergan PLC's current cash flow from operations (TTM) was 1,425. ==> 1,425 <= 14,973 ==> CFROA <= ROA ==> Score 0.

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
=29970.8/135374.02
=0.22139255

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=40133.9/121805.88
=0.32949066

Allergan PLC's gearing of this year was 0.22139255. Allergan PLC's gearing of last year was 0.32949066. ==> 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
=17857.9/7874.7
=2.26775623

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=8579.1/8292
=1.03462373

Allergan PLC's current ratio of this year was 2.26775623. Allergan PLC's current ratio of last year was 1.03462373. ==> 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.

Allergan PLC's number of shares in issue this year was 384.9. Allergan PLC's number of shares in issue last year was 367.8. ==> 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
=12772/14967.2
=0.85333262

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=10017.7/13267.7
=0.75504421

Allergan PLC's gross margin of this year was 0.85333262. Allergan PLC's gross margin of last year was 0.75504421. ==> 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)
=14967.2/135583.3
=0.11039118

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=13267.7/52758
=0.25148224

Allergan PLC's asset turnover of this year was 0.11039118. Allergan PLC's asset turnover of last year was 0.25148224. ==> 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+1+0+1+1+0+1+0
=6

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

Allergan PLC 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.

Allergan PLC Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111110011
Question 2 1111111111
Question 3 1100100011
Question 4 1111111110
Question 5 1101101111
Question 6 1101000101
Question 7 0010000000
Question 8 1111100111
Question 9 1110110100
F-score 8866743666

Allergan PLC Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 0000111111
Question 2 1111111111
Question 3 1000111111
Question 4 1111011100
Question 5 0101111111
Question 6 0100100011
Question 7 0000000010
Question 8 1111111111
Question 9 0111000000
F-score 4645666676
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