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Broadcom Ltd (NAS:AVGO)
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

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

AVGO' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 8
Current: 6

4
8

During the past 9 years, the highest Piotroski F-Score of Broadcom Ltd was 8. The lowest was 4. 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 own currency.

This Year (Oct15) TTM:Last Year (Oct14) TTM:
Net Income was 351 + 344 + 240 + 429 = $1,364 Mil.
Cash Flow from Operations was 481 + 663 + 592 + 582 = $2,318 Mil.
Revenue was 1635 + 1614 + 1735 + 1840 = $6,824 Mil.
Gross Profit was 826 + 846 + 884 + 997 = $3,553 Mil.
Average Total Assets from the begining of this year (Oct14)
to the end of this year (Oct15) was
(10491 + 10697 + 10532 + 9988 + 10592) / 5 = $10460 Mil.
Total Assets at the begining of this year (Oct14) was $10,491 Mil.
Long-Term Debt was $3,903 Mil.
Total Current Assets was $3,775 Mil.
Total Current Liabilities was $1,119 Mil.
Net Income was 134 + 158 + -164 + 135 = $263 Mil.

Revenue was 709 + 701 + 1269 + 1590 = $4,269 Mil.
Gross Profit was 339 + 357 + 393 + 788 = $1,877 Mil.
Average Total Assets from the begining of last year (Oct13)
to the end of last year (Oct14) was
(3415 + 3472 + 3671 + 10262 + 10491) / 5 = $6262.2 Mil.
Total Assets at the begining of last year (Oct13) was $3,415 Mil.
Long-Term Debt was $5,463 Mil.
Total Current Assets was $3,835 Mil.
Total Current Liabilities was $1,016 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.

Broadcom Ltd's current net income (TTM) was 1,364. ==> 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.

Broadcom Ltd's current cash flow from operations (TTM) was 2,318. ==> 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.

Broadcom Ltd's return on assets of this year was 0.1300162. Broadcom Ltd's return on assets of last year was 0.07701318. ==> 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.

Broadcom Ltd's current net income (TTM) was 1,364. Broadcom Ltd's current cash flow from operations (TTM) was 2,318. ==> 2,318 > 1,364 ==> 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: Oct15)=Long-Term Debt/Average Total Assets from Oct14 to Oct15
=3903/10460
=0.37313576

Gearing (Last Year: Oct14)=Long-Term Debt/Average Total Assets from Oct13 to Oct14
=5463/6262.2
=0.87237712

Broadcom Ltd's gearing of this year was 0.37313576. Broadcom Ltd's gearing of last year was 0.87237712. ==> 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: Oct15)=Total Current Assets/Total Current Liabilities
=3775/1119
=3.37354781

Current Ratio (Last Year: Oct14)=Total Current Assets/Total Current Liabilities
=3835/1016
=3.7746063

Broadcom Ltd's current ratio of this year was 3.37354781. Broadcom Ltd's current ratio of last year was 3.7746063. ==> 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.

Broadcom Ltd's number of shares in issue this year was 281. Broadcom Ltd's number of shares in issue last year was 267. ==> 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
=3553/6824
=0.52066237

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1877/4269
=0.43968142

Broadcom Ltd's gross margin of this year was 0.52066237. Broadcom Ltd's gross margin of last year was 0.43968142. ==> 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 (Oct14)
=6824/10491
=0.6504623

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Oct13)
=4269/3415
=1.25007321

Broadcom Ltd's asset turnover of this year was 0.6504623. Broadcom Ltd's asset turnover of last year was 1.25007321. ==> 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+1+1+0+0+1+0
=6

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

Broadcom Ltd 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 own currency.

Broadcom Ltd Annual Data

Oct10Oct11Oct12Oct13Oct14Oct15
Question 1 111111
Question 2 111111
Question 3 110001
Question 4 111111
Question 5 111101
Question 6 111000
Question 7 001000
Question 8 110001
Question 9 110010
F-score 886446

Broadcom Ltd Quarterly Data

Jul13Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15
Question 1 1111111111
Question 2 1111111111
Question 3 0000000011
Question 4 1111111111
Question 5 1111000011
Question 6 0000000000
Question 7 0000100000
Question 8 0000000011
Question 9 0001111100
F-score 4445544466
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