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Brocade Communications Systems Inc (NAS:BRCD)
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

Brocade Communications Systems Inc has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

BRCD' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 9
Current: 3

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 7.


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 (Jul16) TTM:Last Year (Jul15) TTM:
Net Income was 84.388 + 93.646 + 43.085 + 10.495 = $232 Mil.
Cash Flow from Operations was 180.267 + 112.2 + 112.432 + 28.274 = $433 Mil.
Revenue was 588.827 + 574.284 + 523.306 + 590.721 = $2,277 Mil.
Gross Profit was 394.277 + 388.815 + 350.311 + 356.899 = $1,490 Mil.
Average Total Assets from the begining of this year (Jul15)
to the end of this year (Jul16) was
(3904.065 + 4038.178 + 3908.895 + 3992.973 + 4873.765) / 5 = $4143.5752 Mil.
Total Assets at the begining of this year (Jul15) was $3,904 Mil.
Long-Term Debt was $1,517 Mil.
Total Current Assets was $1,599 Mil.
Total Current Liabilities was $701 Mil.
Net Income was 83.419 + 87.267 + 77.04 + 91.667 = $339 Mil.

Revenue was 564.358 + 576.239 + 546.575 + 551.819 = $2,239 Mil.
Gross Profit was 377.118 + 389.683 + 372.209 + 371.904 = $1,511 Mil.
Average Total Assets from the begining of last year (Jul14)
to the end of last year (Jul15) was
(3601.89 + 3733.675 + 4183.481 + 3940.624 + 3904.065) / 5 = $3872.747 Mil.
Total Assets at the begining of last year (Jul14) was $3,602 Mil.
Long-Term Debt was $792 Mil.
Total Current Assets was $1,714 Mil.
Total Current Liabilities was $492 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.

Brocade Communications Systems Inc's current net income (TTM) was 232. ==> 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.

Brocade Communications Systems Inc's current cash flow from operations (TTM) was 433. ==> 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.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Jul15)
=231.614/3904.065
=0.05932637

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Jul14)
=339.393/3601.89
=0.09422636

Brocade Communications Systems Inc's return on assets of this year was 0.05932637. Brocade Communications Systems Inc's return on assets of last year was 0.09422636. ==> 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.

Brocade Communications Systems Inc's current net income (TTM) was 232. Brocade Communications Systems Inc's current cash flow from operations (TTM) was 433. ==> 433 > 232 ==> 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: Jul16)=Long-Term Debt/Average Total Assets from Jul15 to Jul16
=1516.761/4143.5752
=0.36605128

Gearing (Last Year: Jul15)=Long-Term Debt/Average Total Assets from Jul14 to Jul15
=791.63/3872.747
=0.20441046

Brocade Communications Systems Inc's gearing of this year was 0.36605128. Brocade Communications Systems Inc's gearing of last year was 0.20441046. ==> 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: Jul16)=Total Current Assets/Total Current Liabilities
=1599.358/701.21
=2.28085452

Current Ratio (Last Year: Jul15)=Total Current Assets/Total Current Liabilities
=1714.287/492.123
=3.48345231

Brocade Communications Systems Inc's current ratio of this year was 2.28085452. Brocade Communications Systems Inc's current ratio of last year was 3.48345231. ==> 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.

Brocade Communications Systems Inc's number of shares in issue this year was 434.4. Brocade Communications Systems Inc's number of shares in issue last year was 427.5. ==> 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
=1490.302/2277.138
=0.65446275

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1510.914/2238.991
=0.67481915

Brocade Communications Systems Inc's gross margin of this year was 0.65446275. Brocade Communications Systems Inc's gross margin of last year was 0.67481915. ==> 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 (Jul15)
=2277.138/3904.065
=0.58327359

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Jul14)
=2238.991/3601.89
=0.6216156

Brocade Communications Systems Inc's asset turnover of this year was 0.58327359. Brocade Communications Systems Inc's asset turnover of last year was 0.6216156. ==> 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+0+0+0+0+0
=3

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

Brocade Communications Systems Inc has an F-score of 3. It is a bad or low score, which usually implies poor business operation.


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

Oct06Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15
Question 1 1110111111
Question 2 1111111111
Question 3 1110101111
Question 4 1111111111
Question 5 1001111110
Question 6 1000101111
Question 7 0000001111
Question 8 1010111111
Question 9 1100011000
F-score 8553769887

Brocade Communications Systems Inc Quarterly Data

Apr14Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16
Question 1 1111111111
Question 2 1111111111
Question 3 1110111100
Question 4 1111111111
Question 5 1110000110
Question 6 1110111110
Question 7 1111111110
Question 8 1111111110
Question 9 0001000000
F-score 8886777873
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