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

Warning Sign:

Piotroski F-Score of 3 is low, which usually implies poor business operation.

The zones of discrimination were as such:

Good or high score = 8 or 9
Bad or low score = 0 or 1

Arcos Dorados Holdings Inc has an F-score of 3 indicating the company's financial situation is typical for a stable company.

ARCO' s 10-Year Piotroski F-Score Range
Min: 3   Max: 6
Current: 3

3
6

During the past 5 years, the highest Piotroski F-Score of Arcos Dorados Holdings Inc was 6. The lowest was 3. And the median was 4.


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 (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was -98.986 + -20.63 + 32.09 + 19.581 = $-68 Mil.
Cash Flow from Operations was 24.054 + -39.992 + 133.525 + 79.068 = $197 Mil.
Revenue was 917.922 + 915.494 + 1046.003 + 1021.212 = $3,901 Mil.
Gross Profit was 98.41 + 100.981 + 186.25 + 194.106 = $580 Mil.
Total Assets at the begining of this year (Jun13) was $1,968 Mil.
Total Assets was $1,951 Mil.
Long-Term Debt was $785 Mil.
Total Current Assets was $473 Mil.
Total Current Liabilities was $595 Mil.
Net Income was 8.785 + -6.602 + 44.221 + 32.608 = $79 Mil.

Revenue was 989.185 + 976.91 + 1009.677 + 961.907 = $3,938 Mil.
Gross Profit was 123.611 + 120.643 + 171.664 + 156.428 = $572 Mil.
Total Assets at the begining of last year (Jun12) was $1,919 Mil.
Total Assets was $1,968 Mil.
Long-Term Debt was $625 Mil.
Total Current Assets was $551 Mil.
Total Current Liabilities was $604 Mil.

Profitability

Q1. 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 was -68. ==> Negative ==> Score 0.

Q2. 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 was 197. ==> Positive ==> Score 1.

Q3. 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/Total Assets at the beginning of this year (Jun13)
=-67.945/1967.558
=-0.03453265

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Jun12)
=79.012/1918.747
=0.04117896

Arcos Dorados Holdings Inc's return on assets of this year was -0.03453265. Arcos Dorados Holdings Inc's return on assets of last year was 0.04117896. ==> Last year is higher ==> Score 0.

Q4. 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 was -68. Arcos Dorados Holdings Inc's current cash flow from operations was 197. ==> 197 > -68 ==> CFROA > ROA ==> Score 1.

Funding

Q5. 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)=Long-Term Debt/Total Assets
=785.235/1951.123
=0.40245284

Gearing (Last Year)=Long-Term Debt/Total Assets
=625.311/1967.558
=0.31781071

Arcos Dorados Holdings Inc's gearing of this year was 0.40245284. Arcos Dorados Holdings Inc's gearing of last year was 0.31781071. ==> Last year is lower than this year ==> Score 0.

Q6. 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)=Total Current Assets/Total Current Liabilities
=472.501/595.104
=0.79398055

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=550.522/603.706
=0.91190414

Arcos Dorados Holdings Inc's current ratio of this year was 0.79398055. Arcos Dorados Holdings Inc's current ratio of last year was 0.91190414. ==> Last year's current ratio is higher ==> Score 0.

Q7. 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 210.4. Arcos Dorados Holdings Inc's number of shares in issue last year was 210.2. ==> There is larger number of shares in issue this year. ==> Score 0.

Efficiency

Q8. 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)=Gross Profit/Revenue
=579.747/3900.631
=0.14862903

Gross Margin (Last Year)=Gross Profit/Revenue
=572.346/3937.679
=0.14535111

Arcos Dorados Holdings Inc's gross margin of this year was 0.14862903. Arcos Dorados Holdings Inc's gross margin of last year was 0.14535111. ==> This year's gross margin is higher. ==> Score 1.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales 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/Total Assets at the beginning of this year (Jun13)
=3900.631/1967.558
=1.9824732

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Jun12)
=3937.679/1918.747
=2.05221376

Arcos Dorados Holdings Inc's asset turnover of this year was 1.9824732. Arcos Dorados Holdings Inc's asset turnover of last year was 2.05221376. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=0+1+0+1+0+0+0+1+0
=3

Good or high score = 8 or 9

Bad or low score = 0 or 1

Arcos Dorados Holdings Inc has an F-score of 3 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.

Arcos Dorados Holdings Inc Annual Data

Dec09Dec10Dec11Dec12Dec13
Q1 1
Q2 1
Q3 0
Q4 1
Q5 0
Q6 0
Q7 0
Q8 0
Q9 0
F-score 3

Arcos Dorados Holdings Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 111110
Q2 111111
Q3 000000
Q4 111111
Q5 010000
Q6 001000
Q7 000000
Q8 111011
Q9 010000
F-score 0006465343
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