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Avago Technologies Ltd (NAS:AVGO)
Piotroski F-Score
4 (As of Today)

The zones of discrimination were as such:

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

Avago Technologies Ltd has an F-score of 4 indicating the company's financial situation is typical for a stable company.

AVGO' s 10-Year Piotroski F-Score Range
Min: 4   Max: 8
Current: 4

4
8

During the past 7 years, the highest Piotroski F-Score of Avago Technologies 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 (Jan14) TTM:Last Year (Jan13) TTM:
Net Income was 134 + 172 + 142 + 113 = $561 Mil.
Cash Flow from Operations was 229 + 209 + 137 + 191 = $766 Mil.
Revenue was 709 + 738 + 644 + 562 = $2,653 Mil.
Gross Profit was 339 + 346 + 304 + 272 = $1,261 Mil.
Total Assets at the begining of this year (Jan13) was $2,892 Mil.
Total Assets was $3,472 Mil.
Long-Term Debt was $1 Mil.
Total Current Assets was $1,859 Mil.
Total Current Liabilities was $364 Mil.
Net Income was 125 + 159 + 145 + 134 = $563 Mil.

Revenue was 576 + 618 + 606 + 577 = $2,377 Mil.
Gross Profit was 276 + 299 + 295 + 278 = $1,148 Mil.
Total Assets at the begining of last year (Jan12) was $2,444 Mil.
Total Assets was $2,892 Mil.
Long-Term Debt was $2 Mil.
Total Current Assets was $1,713 Mil.
Total Current Liabilities was $277 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.

Avago Technologies Ltd's current net income was 561. ==> Positive ==> Score 1.

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.

Avago Technologies Ltd's current cash flow from operations was 766. ==> 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 (Jan13)
=561/2892
=0.1939834

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Jan12)
=563/2444
=0.23036007

Avago Technologies Ltd's return on assets of this year was 0.1939834. Avago Technologies Ltd's return on assets of last year was 0.23036007. ==> 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.

Avago Technologies Ltd's current net income was 561. Avago Technologies Ltd's current cash flow from operations was 766. ==> 766 > 561 ==> 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 1 if gearing is lower, 0 if it’s higher.

Gearing (This Year)=Long-Term Debt/Total Assets
=1/3472
=0.00028802

Gearing (Last Year)=Long-Term Debt/Total Assets
=2/2892
=0.00069156

Avago Technologies Ltd's gearing of this year was 0.00028802. Avago Technologies Ltd's gearing of last year was 0.00069156. ==> This year is lower. ==> Score 1.

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
=1859/364
=5.10714286

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=1713/277
=6.18411552

Avago Technologies Ltd's current ratio of this year was 5.10714286. Avago Technologies Ltd's current ratio of last year was 6.18411552. ==> 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 1 if there is fewer number of shares in issue this year. Score 0 otherwise.

Avago Technologies Ltd's number of shares in issue this year was 255. Avago Technologies Ltd's number of shares in issue last year was 251. ==> There is more 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
=1261/2653
=0.47531097

Gross Margin (Last Year)=Gross Profit/Revenue
=1148/2377
=0.48296172

Avago Technologies Ltd's gross margin of this year was 0.47531097. Avago Technologies Ltd's gross margin of last year was 0.48296172. ==> Last year's gross margin is higher ==> Score 0.

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 (Jan13)
=2653/2892
=0.91735823

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Jan12)
=2377/2444
=0.97258592

Avago Technologies Ltd's asset turnover of this year was 0.91735823. Avago Technologies Ltd's asset turnover of last year was 0.97258592. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+0+1+1+0+0+0+0
=4

Good or high score = 8 or 9

Bad or low score = 0 or 1

Avago Technologies Ltd has an F-score of 4 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.

Avago Technologies Ltd Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13
Q1 111
Q2 111
Q3 100
Q4 111
Q5 111
Q6 110
Q7 010
Q8 100
Q9 100
F-score 864

Avago Technologies Ltd Quarterly Data

Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14
Q1 1111111111
Q2 1111111111
Q3 1000000000
Q4 1111111111
Q5 1111111111
Q6 1111111000
Q7 0011100000
Q8 1100000000
Q9 1000000000
F-score 8666655444
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