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Broadcom Ltd (NAS:AVGO)
Piotroski F-Score
5 (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 5 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: 5

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 5.


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 (Jan16) TTM:Last Year (Jan15) TTM:
Net Income was 344 + 240 + 429 + 377 = $1,390 Mil.
Cash Flow from Operations was 663 + 592 + 582 + 474 = $2,311 Mil.
Revenue was 1614 + 1735 + 1840 + 1771 = $6,960 Mil.
Gross Profit was 846 + 884 + 997 + 941 = $3,668 Mil.
Average Total Assets from the begining of this year (Jan15)
to the end of this year (Jan16) was
(10697 + 10532 + 9988 + 10592 + 10777) / 5 = $10517.2 Mil.
Total Assets at the begining of this year (Jan15) was $10,697 Mil.
Long-Term Debt was $3,892 Mil.
Total Current Assets was $3,971 Mil.
Total Current Liabilities was $862 Mil.
Net Income was 158 + -164 + 135 + 351 = $480 Mil.

Revenue was 701 + 1269 + 1590 + 1635 = $5,195 Mil.
Gross Profit was 357 + 393 + 788 + 826 = $2,364 Mil.
Average Total Assets from the begining of last year (Jan14)
to the end of last year (Jan15) was
(3472 + 3671 + 10262 + 10491 + 10697) / 5 = $7718.6 Mil.
Total Assets at the begining of last year (Jan14) was $3,472 Mil.
Long-Term Debt was $5,454 Mil.
Total Current Assets was $4,098 Mil.
Total Current Liabilities was $845 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 1,390. ==> 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 2,311. ==> 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 0.12994297. Broadcom Ltd's return on assets of last year was 0.13824885. ==> 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.

Broadcom Ltd's current net income (TTM) was 1,390. Broadcom Ltd's current cash flow from operations (TTM) was 2,311. ==> 2,311 > 1,390 ==> 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: Jan16)=Long-Term Debt/Average Total Assets from Jan15 to Jan16
=3892/10517.2
=0.37006047

Gearing (Last Year: Jan15)=Long-Term Debt/Average Total Assets from Jan14 to Jan15
=5454/7718.6
=0.70660482

Broadcom Ltd's gearing of this year was 0.37006047. Broadcom Ltd's gearing of last year was 0.70660482. ==> 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: Jan16)=Total Current Assets/Total Current Liabilities
=3971/862
=4.60672854

Current Ratio (Last Year: Jan15)=Total Current Assets/Total Current Liabilities
=4098/845
=4.84970414

Broadcom Ltd's current ratio of this year was 4.60672854. Broadcom Ltd's current ratio of last year was 4.84970414. ==> 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 289. Broadcom Ltd's number of shares in issue last year was 278. ==> 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
=3668/6960
=0.52701149

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2364/5195
=0.45505294

Broadcom Ltd's gross margin of this year was 0.52701149. Broadcom Ltd's gross margin of last year was 0.45505294. ==> 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 (Jan15)
=6960/10697
=0.65064971

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Jan14)
=5195/3472
=1.49625576

Broadcom Ltd's asset turnover of this year was 0.65064971. Broadcom Ltd's asset turnover of last year was 1.49625576. ==> 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+0+1+1+0+0+1+0
=5

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

Broadcom 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.

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

Oct13Jan14Apr14Jul14Oct14Jan15Apr15Jul15Oct15Jan16
Question 1 1111111111
Question 2 1111111111
Question 3 0000000110
Question 4 1111111111
Question 5 1110000111
Question 6 0000000000
Question 7 0001000000
Question 8 0000000111
Question 9 0011111000
F-score 4455444665
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