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GuruFocus has detected 6 Warning Signs with Bank of Montreal $BMO.
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Bank of Montreal (NYSE:BMO)
Piotroski F-Score
3 (As of Today)

Warning Sign:

Piotroski F-Score of 3 is low, which usually implies poor business operation.

The zones of discrimination were as such:

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

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

BMO' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 6
Current: 3

2
6

During the past 13 years, the highest Piotroski F-Score of Bank of Montreal was 6. The lowest was 2. And the median was 4.


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 local exchange's currency.

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Net Income was 746.058558559 + 759.088781401 + 953.87680049 + 1014.26307448 = $3,473 Mil.
Cash Flow from Operations was 6629.36373874 + -2310.03276642 + 661.967514557 + -7523.96045581 = $-2,543 Mil.
Revenue was 3571.93130631 + 3979.55999376 + 4315.8136684 + 3983.09561543 = $15,850 Mil.
Gross Profit was 3571.93130631 + 3979.55999376 + 4315.8136684 + 3983.09561543 = $15,850 Mil.
Average Total Assets from the begining of this year (Oct15)
to the end of this year (Oct16) was
(491035.03672 + 492182.573198 + 531641.441723 + 529943.303708 + 519157.044751) / 5 = $512791.88002 Mil.
Total Assets at the begining of this year (Oct15) was $491,035 Mil.
Long-Term Debt was $3,350 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 Mil.
Net Income was 813.397129187 + 804.895841777 + 921.246987483 + 922.582619339 = $3,462 Mil.

Revenue was 4170.10394324 + 3668.63905325 + 3751.84638109 + 3811.1995104 = $15,402 Mil.
Gross Profit was 4170.10394324 + 3668.63905325 + 3751.84638109 + 3811.1995104 = $15,402 Mil.
Average Total Assets from the begining of last year (Oct14)
to the end of last year (Oct15) was
(525025.865144 + 554702.194357 + 513313.609467 + 522772.292622 + 491035.03672) / 5 = $521369.799662 Mil.
Total Assets at the begining of last year (Oct14) was $525,026 Mil.
Long-Term Debt was $3,378 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 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.

Bank of Montreal's current net income (TTM) was 3,473. ==> 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.

Bank of Montreal's current cash flow from operations (TTM) was -2,543. ==> Negative ==> Score 0.

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.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Oct15)
=3473.28721494/491035.03672
=0.0070734

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Oct14)
=3462.12257779/525025.865144
=0.00659419

Bank of Montreal's return on assets of this year was 0.0070734. Bank of Montreal's return on assets of last year was 0.00659419. ==> 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.

Bank of Montreal's current net income (TTM) was 3,473. Bank of Montreal's current cash flow from operations (TTM) was -2,543. ==> -2,543 <= 3,473 ==> CFROA <= ROA ==> Score 0.

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: Oct16)=Long-Term Debt/Average Total Assets from Oct15 to Oct16
=3349.9358539/512791.88002
=0.00653274

Gearing (Last Year: Oct15)=Long-Term Debt/Average Total Assets from Oct14 to Oct15
=3378.2129743/521369.799662
=0.00647949

Bank of Montreal's gearing of this year was 0.00653274. Bank of Montreal's gearing of last year was 0.00647949. ==> Last year is lower than this year ==> Score 0.

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: Oct16)=Total Current Assets/Total Current Liabilities
=0/0
=

Current Ratio (Last Year: Oct15)=Total Current Assets/Total Current Liabilities
=0/0
=

Bank of Montreal's current ratio of this year was . Bank of Montreal's current ratio of last year was . ==> 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.

Bank of Montreal's number of shares in issue this year was 646.1. Bank of Montreal's number of shares in issue last year was 647.2. ==> 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
=15850.4005839/15850.4005839
=1

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=15401.788888/15401.788888
=1

Bank of Montreal's gross margin of this year was 1. Bank of Montreal's gross margin of last year was 1. ==> 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 (Oct15)
=15850.4005839/491035.03672
=0.03227957

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Oct14)
=15401.788888/525025.865144
=0.0293353

Bank of Montreal's asset turnover of this year was 0.03227957. Bank of Montreal's asset turnover of last year was 0.0293353. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=1+0+1+0+0+0+1+0+1
=4

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

Bank of Montreal 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 local exchange's currency.

Bank of Montreal Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct16
Question 1 1111111
Question 2 0110110
Question 3 0001011
Question 4 0110010
Question 5 0101010
Question 6 0000000
Question 7 1100001
Question 8 0000000
Question 9 0011101
F-score 2544354

Bank of Montreal Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
Question 1 11111111
Question 2 10011000
Question 3 00000011
Question 4 10000000
Question 5 01111000
Question 6 00000000
Question 7 00011101
Question 8 00000000
Question 9 11100011
F-score 43344234
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