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Avago Technologies Ltd (NAS:AVGO)
Piotroski F-Score
5 (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 5 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: 5

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 (Apr14) TTM:Last Year (Apr13) TTM:
Net Income was 158 + 134 + 172 + 142 = $606 Mil.
Cash Flow from Operations was 251 + 229 + 209 + 137 = $826 Mil.
Revenue was 701 + 709 + 738 + 644 = $2,792 Mil.
Gross Profit was 357 + 339 + 346 + 304 = $1,346 Mil.
Total Assets at the begining of this year (Apr13) was $3,039 Mil.
Total Assets was $3,671 Mil.
Long-Term Debt was $0 Mil.
Total Current Assets was $2,034 Mil.
Total Current Liabilities was $416 Mil.
Net Income was 113 + 125 + 159 + 145 = $542 Mil.

Revenue was 562 + 576 + 618 + 606 = $2,362 Mil.
Gross Profit was 272 + 276 + 299 + 295 = $1,142 Mil.
Total Assets at the begining of last year (Apr12) was $2,611 Mil.
Total Assets was $3,039 Mil.
Long-Term Debt was $2 Mil.
Total Current Assets was $1,818 Mil.
Total Current Liabilities was $330 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 606. ==> 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 826. ==> 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 (Apr13)
=606/3039
=0.1994077

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Apr12)
=542/2611
=0.2075833

Avago Technologies Ltd's return on assets of this year was 0.1994077. Avago Technologies Ltd's return on assets of last year was 0.2075833. ==> 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 606. Avago Technologies Ltd's current cash flow from operations was 826. ==> 826 > 606 ==> 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
=0/3671
=0

Gearing (Last Year)=Long-Term Debt/Total Assets
=2/3039
=0.00065811

Avago Technologies Ltd's gearing of this year was 0. Avago Technologies Ltd's gearing of last year was 0.00065811. ==> This year is lower or equal to last year. ==> 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
=2034/416
=4.88942308

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=1818/330
=5.50909091

Avago Technologies Ltd's current ratio of this year was 4.88942308. Avago Technologies Ltd's current ratio of last year was 5.50909091. ==> 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.

Avago Technologies Ltd's number of shares in issue this year was 258. Avago Technologies Ltd's number of shares in issue last year was 251. ==> 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
=1346/2792
=0.48209169

Gross Margin (Last Year)=Gross Profit/Revenue
=1142/2362
=0.48348857

Avago Technologies Ltd's gross margin of this year was 0.48209169. Avago Technologies Ltd's gross margin of last year was 0.48348857. ==> 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 (Apr13)
=2792/3039
=0.91872326

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Apr12)
=2362/2611
=0.90463424

Avago Technologies Ltd's asset turnover of this year was 0.91872326. Avago Technologies Ltd's asset turnover of last year was 0.90463424. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+0+1+1+0+0+0+1
=5

Good or high score = 8 or 9

Bad or low score = 0 or 1

Avago Technologies Ltd has an F-score of 5 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

Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14Apr14
Q1 1111111111
Q2 1111111111
Q3 0000000000
Q4 1111111111
Q5 1111111111
Q6 1111110000
Q7 1111000000
Q8 1000000000
Q9 0000000001
F-score 7666554445
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