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Brocade Communications Systems Inc (NAS:BRCD)
Piotroski F-Score
8 (As of Today)

Good Sign:

Piotroski F-Score of 7 is 7, indicating very healthy situation.

The zones of discrimination were as such:

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

Brocade Communications Systems Inc has an F-score of 7 indicating the company's financial situation is typical for a stable company.

BRCD' s 10-Year Piotroski F-Score Range
Min: 2   Max: 9
Current: 8

2
9

During the past 13 years, the highest Piotroski F-Score of Brocade Communications Systems Inc was 9. The lowest was 2. 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 80.884 + 64.233 + 118.696 + 46.949 = $311 Mil.
Cash Flow from Operations was 109.469 + 169.769 + 102.155 + 119.615 = $501 Mil.
Revenue was 564.535 + 558.8 + 536.551 + 538.784 = $2,199 Mil.
Gross Profit was 372.67 + 362.64 + 338.202 + 334.112 = $1,408 Mil.
Total Assets at the begining of this year (Jan13) was $3,772 Mil.
Total Assets was $3,578 Mil.
Long-Term Debt was $596 Mil.
Total Current Assets was $1,416 Mil.
Total Current Liabilities was $491 Mil.
Net Income was -21.255 + 54.001 + 43.3 + 39.296 = $115 Mil.

Revenue was 588.729 + 578.357 + 555.332 + 543.439 = $2,266 Mil.
Gross Profit was 373.925 + 360.69 + 340.478 + 337.082 = $1,412 Mil.
Total Assets at the begining of last year (Jan12) was $3,479 Mil.
Total Assets was $3,772 Mil.
Long-Term Debt was $597 Mil.
Total Current Assets was $1,391 Mil.
Total Current Liabilities was $828 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.

Brocade Communications Systems Inc's current net income was 311. ==> 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.

Brocade Communications Systems Inc's current cash flow from operations was 501. ==> 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)
=310.762/3772.182
=0.08238256

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Jan12)
=115.342/3478.74
=0.03315626

Brocade Communications Systems Inc's return on assets of this year was 0.08238256. Brocade Communications Systems Inc's return on assets of last year was 0.03315626. ==> This year is higher. ==> Score 1.

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.

Brocade Communications Systems Inc's current net income was 311. Brocade Communications Systems Inc's current cash flow from operations was 501. ==> 501 > 311 ==> 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
=595.694/3577.837
=0.16649557

Gearing (Last Year)=Long-Term Debt/Total Assets
=597.44/3772.182
=0.15838048

Brocade Communications Systems Inc's gearing of this year was 0.16649557. Brocade Communications Systems Inc's gearing of last year was 0.15838048. ==> Last year is lower ==> Score 0.

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
=1416.132/490.741
=2.88570142

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=1390.959/828.166
=1.67956545

Brocade Communications Systems Inc's current ratio of this year was 2.88570142. Brocade Communications Systems Inc's current ratio of last year was 1.67956545. ==> This year's current ratio is higher. ==> Score 1.

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.

Brocade Communications Systems Inc's number of shares in issue this year was 453.5. Brocade Communications Systems Inc's number of shares in issue last year was 454.8. ==> There is the same number of shares in issue this year, or fewer. ==> Score 1.

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
=1407.624/2198.67
=0.64021613

Gross Margin (Last Year)=Gross Profit/Revenue
=1412.175/2265.857
=0.62324101

Brocade Communications Systems Inc's gross margin of this year was 0.64021613. Brocade Communications Systems Inc's gross margin of last year was 0.62324101. ==> This year's gross margin is higher. ==> Score 1.

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)
=2198.67/3772.182
=0.58286424

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Jan12)
=2265.857/3478.74
=0.65134416

Brocade Communications Systems Inc's asset turnover of this year was 0.58286424. Brocade Communications Systems Inc's asset turnover of last year was 0.65134416. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+1+1+0+1+1+1+0
=7

Good or high score = 8 or 9

Bad or low score = 0 or 1

Brocade Communications Systems Inc has an F-score of 7 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.

Brocade Communications Systems Inc Annual Data

Oct04Oct05Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13
Q1 0111101111
Q2 1111111111
Q3 1111101011
Q4 1111111111
Q5 1100010111
Q6 1010001011
Q7 0000000011
Q8 1110101111
Q9 1111000110
F-score 7775536698

Brocade Communications Systems Inc Quarterly Data

Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14
Q1 1111111111
Q2 1111111111
Q3 0001111111
Q4 1111111111
Q5 1111111110
Q6 0110101111
Q7 0111111111
Q8 1111111111
Q9 1101111100
F-score 6878989987
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