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Arcos Dorados Holdings Inc (NYSE:ARCO)
Piotroski F-Score
2 (As of Today)

Warning Sign:

Piotroski F-Score of 2 is low, which usually implies poor business operation.

The zones of discrimination were as such:

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

Arcos Dorados Holdings Inc has an F-score of 2. It is a bad or low score, which usually implies poor business operation.

ARCO' s 10-Year Piotroski F-Score Range
Min: 1   Max: 6
Current: 2

1
6

During the past 6 years, the highest Piotroski F-Score of Arcos Dorados Holdings Inc was 6. The lowest was 1. And the median was 3.


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 (Mar15) TTM:Last Year (Mar14) TTM:
Net Income was -98.986 + 0.24 + 10.043 + -28.233 = $-117 Mil.
Cash Flow from Operations was 0 + 0 + 0 + 0 = $0 Mil.
Revenue was 917.922 + 904.02 + 913.629 + 775.058 = $3,511 Mil.
Gross Profit was 98.41 + 107.264 + 131.743 + 85.075 = $422 Mil.
Average Total Assets from the begining of this year (Mar14)
to the end of this year (Mar15) was
(2061.704 + 1951.123 + 1848.297 + 1794.78 + 1555.07) / 5 = $1842.1948 Mil.
Total Assets at the begining of this year (Mar14) was $2,062 Mil.
Long-Term Debt was $712 Mil.
Total Current Assets was $334 Mil.
Total Current Liabilities was $426 Mil.
Net Income was 8.785 + 19.581 + 32.09 + -20.63 = $40 Mil.

Revenue was 989.185 + 1021.212 + 1046.003 + 915.494 = $3,972 Mil.
Gross Profit was 123.611 + 146.453 + 170.63 + 100.981 = $542 Mil.
Average Total Assets from the begining of last year (Mar13)
to the end of last year (Mar14) was
(2022.483 + 1967.558 + 2213.356 + 2180.259 + 2061.704) / 5 = $2089.072 Mil.
Total Assets at the begining of last year (Mar13) was $2,022 Mil.
Long-Term Debt was $780 Mil.
Total Current Assets was $558 Mil.
Total Current Liabilities was $619 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.

Arcos Dorados Holdings Inc's current net income (TTM) was -117. ==> Negative ==> Score 0.

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.

Arcos Dorados Holdings Inc's current cash flow from operations (TTM) was 0. ==> Negative ==> Score 0.

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 (Mar14)
=-116.936/2061.704
=-0.05671813

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Mar13)
=39.826/2022.483
=0.01969164

Arcos Dorados Holdings Inc's return on assets of this year was -0.05671813. Arcos Dorados Holdings Inc's return on assets of last year was 0.01969164. ==> 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.

Arcos Dorados Holdings Inc's current net income (TTM) was -117. Arcos Dorados Holdings Inc's current cash flow from operations (TTM) was 0. ==> 0 > -117 ==> 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: Mar15)=Long-Term Debt/Average Total Assets from Mar14 to Mar15
=711.813/1842.1948
=0.38639399

Gearing (Last Year: Mar14)=Long-Term Debt/Average Total Assets from Mar13 to Mar14
=779.639/2089.072
=0.37319872

Arcos Dorados Holdings Inc's gearing of this year was 0.38639399. Arcos Dorados Holdings Inc's gearing of last year was 0.37319872. ==> 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: Mar15)=Total Current Assets/Total Current Liabilities
=333.565/425.578
=0.78379287

Current Ratio (Last Year: Mar14)=Total Current Assets/Total Current Liabilities
=557.99/619.346
=0.90093421

Arcos Dorados Holdings Inc's current ratio of this year was 0.78379287. Arcos Dorados Holdings Inc's current ratio of last year was 0.90093421. ==> 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.

Arcos Dorados Holdings Inc's number of shares in issue this year was 210.2. Arcos Dorados Holdings Inc's number of shares in issue last year was 210.2. ==> 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
=422.492/3510.629
=0.12034652

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=541.675/3971.894
=0.136377

Arcos Dorados Holdings Inc's gross margin of this year was 0.12034652. Arcos Dorados Holdings Inc's gross margin of last year was 0.136377. ==> 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 (Mar14)
=3510.629/2061.704
=1.70278032

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Mar13)
=3971.894/2022.483
=1.96387015

Arcos Dorados Holdings Inc's asset turnover of this year was 1.70278032. Arcos Dorados Holdings Inc's asset turnover of last year was 1.96387015. ==> 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
=0+0+0+1+0+0+1+0+0
=2

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

Arcos Dorados Holdings Inc has an F-score of 2. It is a bad or low score, which usually implies poor business operation.


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.

Arcos Dorados Holdings Inc Annual Data

Dec13Dec14
Question 1 10
Question 2 10
Question 3 00
Question 4 11
Question 5 00
Question 6 00
Question 7 00
Question 8 00
Question 9 00
F-score 31

Arcos Dorados Holdings Inc Quarterly Data

Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15
Question 1 111110000
Question 2 111111100
Question 3 000000000
Question 4 111111111
Question 5 010000100
Question 6 001000000
Question 7 000000001
Question 8 000000000
Question 9 010000000
F-score 354332312
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