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Baxter International Inc (NYSE:BAX)
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

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

BAX' s 10-Year Piotroski F-Score Range
Min: 4   Max: 8
Current: 6

4
8

During the past 13 years, the highest Piotroski F-Score of Baxter International Inc 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 (Dec14) TTM:Last Year (Dec13) TTM:
Net Income was 556 + 520 + 468 + 953 = $2,497 Mil.
Cash Flow from Operations was 559 + 599 + 914 + 1143 = $3,215 Mil.
Revenue was 3951 + 4264 + 4197 + 4472 = $16,884 Mil.
Gross Profit was 1961 + 2041 + 2073 + 2224 = $8,299 Mil.
Average Total Assets from the begining of this year (Dec13)
to the end of this year (Dec14) was
(25224 + 25261 + 25629 + 25563 + 25917) / 5 = $25518.8 Mil.
Total Assets at the begining of this year (Dec13) was $25,224 Mil.
Long-Term Debt was $7,606 Mil.
Total Current Assets was $10,351 Mil.
Total Current Liabilities was $6,042 Mil.
Net Income was 552 + 590 + 544 + 326 = $2,012 Mil.

Revenue was 3448 + 3669 + 3710 + 4322 = $15,149 Mil.
Gross Profit was 1756 + 1939 + 1906 + 1996 = $7,597 Mil.
Average Total Assets from the begining of last year (Dec12)
to the end of last year (Dec13) was
(20390 + 20318 + 23751 + 25250 + 25224) / 5 = $22986.6 Mil.
Total Assets at the begining of last year (Dec12) was $20,390 Mil.
Long-Term Debt was $8,126 Mil.
Total Current Assets was $10,195 Mil.
Total Current Liabilities was $5,248 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.

Baxter International Inc's current net income (TTM) was 2,497. ==> 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.

Baxter International Inc's current cash flow from operations (TTM) was 3,215. ==> 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.

Baxter International Inc's return on assets of this year was 0.09899302. Baxter International Inc's return on assets of last year was 0.09867582. ==> 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.

Baxter International Inc's current net income (TTM) was 2,497. Baxter International Inc's current cash flow from operations (TTM) was 3,215. ==> 3,215 > 2,497 ==> 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: Dec14)=Long-Term Debt/Average Total Assets from Dec13 to Dec14
=7606/25518.8
=0.29805477

Gearing (Last Year: Dec13)=Long-Term Debt/Average Total Assets from Dec12 to Dec13
=8126/22986.6
=0.35351031

Baxter International Inc's gearing of this year was 0.29805477. Baxter International Inc's gearing of last year was 0.35351031. ==> 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: Dec14)=Total Current Assets/Total Current Liabilities
=10351/6042
=1.71317445

Current Ratio (Last Year: Dec13)=Total Current Assets/Total Current Liabilities
=10195/5248
=1.94264482

Baxter International Inc's current ratio of this year was 1.71317445. Baxter International Inc's current ratio of last year was 1.94264482. ==> 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.

Baxter International Inc's number of shares in issue this year was 544. Baxter International Inc's number of shares in issue last year was 546. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

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
=8299/16884
=0.49153044

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=7597/15149
=0.50148525

Baxter International Inc's gross margin of this year was 0.49153044. Baxter International Inc's gross margin of last year was 0.50148525. ==> Last year's gross margin is higher ==> Score 0.

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 (Dec13)
=16884/25224
=0.66936251

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec12)
=15149/20390
=0.74296224

Baxter International Inc's asset turnover of this year was 0.66936251. Baxter International Inc's asset turnover of last year was 0.74296224. ==> 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+1+0+0
=6

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

Baxter International Inc 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.

Baxter International Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Question 1 1111111111
Question 2 1111111111
Question 3 1111101001
Question 4 1111111111
Question 5 1010100001
Question 6 0110010100
Question 7 0011111111
Question 8 1111101100
Question 9 1101101000
F-score 7787857646

Baxter International Inc Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
Question 1 1111111111
Question 2 1111111111
Question 3 1000000001
Question 4 1111111111
Question 5 0000000111
Question 6 1111000000
Question 7 1111111111
Question 8 1111100000
Question 9 1000001000
F-score 8666545556
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