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Diageo PLC (NYSE:DEO)
Piotroski F-Score
6 (As of Today)

The zones of discrimination were as such:

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

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

DEO' s 10-Year Piotroski F-Score Range
Min: 5   Max: 8
Current: 6

5
8

During the past 13 years, the highest Piotroski F-Score of Diageo PLC was 8. The lowest was 5. 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 (Jun13) TTM:Last Year (Jun12) TTM:
Net Income was $3,771 Mil.
Cash Flow from Operations was $3,108 Mil.
Revenue was $17,349 Mil.
Gross Profit was $10,566 Mil.
Total Assets at the begining of this year (Jun12) was $34,867 Mil.
Total Assets was $38,053 Mil.
Long-Term Debt was $12,493 Mil.
Total Current Assets was $13,041 Mil.
Total Current Liabilities was $8,413 Mil.
Net Income was $3,030 Mil.

Revenue was $16,789 Mil.
Gross Profit was $10,145 Mil.
Total Assets at the begining of last year (Jun11) was $31,950 Mil.
Total Assets was $34,867 Mil.
Long-Term Debt was $11,543 Mil.
Total Current Assets was $11,315 Mil.
Total Current Liabilities was $7,463 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.

Diageo PLC's current net income was 3,771. ==> 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.

Diageo PLC's current cash flow from operations was 3,108. ==> 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 (Jun12)
=3770.86494689/34867.3946958
=0.10814874

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Jun11)
=3029.64118565/31949.9192246
=0.09482469

Diageo PLC's return on assets of this year was 0.10814874. Diageo PLC's return on assets of last year was 0.09482469. ==> 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.

Diageo PLC's current net income was 3,771. Diageo PLC's current cash flow from operations was 3,108. ==> 3,108 =< 3,771 ==> CFROA =< ROA ==> Score 0.

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
=12493.1714719/38053.1107739
=0.32830881

Gearing (Last Year)=Long-Term Debt/Total Assets
=11542.9017161/34867.3946958
=0.33105145

Diageo PLC's gearing of this year was 0.32830881. Diageo PLC's gearing of last year was 0.33105145. ==> This year is lower. ==> Score 1.

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
=13040.9711684/8412.74658574
=1.5501443

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=11315.1326053/7463.33853354
=1.51609532

Diageo PLC's current ratio of this year was 1.5501443. Diageo PLC's current ratio of last year was 1.51609532. ==> 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.

Diageo PLC's number of shares in issue this year was 629.3. Diageo PLC's number of shares in issue last year was 627.3. ==> There is more number of shares in issue this year. ==> Score 0.

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
=10566.0091047/17349.0136571
=0.6090265

Gross Margin (Last Year)=Gross Profit/Revenue
=10145.0858034/16789.3915757
=0.60425571

Diageo PLC's gross margin of this year was 0.6090265. Diageo PLC's gross margin of last year was 0.60425571. ==> 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 (Jun12)
=17349.0136571/34867.3946958
=0.49757126

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Jun11)
=16789.3915757/31949.9192246
=0.52549089

Diageo PLC's asset turnover of this year was 0.49757126. Diageo PLC's asset turnover of last year was 0.52549089. ==> 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+0+1+1+0+1+0
=6

Good or high score = 8 or 9

Bad or low score = 0 or 1

Diageo PLC 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.

Diageo PLC Annual Data

Jun04Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13
Q1 1111111111
Q2 1111111111
Q3 1010001101
Q4 1101111110
Q5 0000000111
Q6 1110011011
Q7 1111111000
Q8 0101100111
Q9 1011001100
F-score 7666557766
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