Switch to:
Discover Financial Services (NYSE:DFS)
Piotroski F-Score
4 (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

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

DFS' s 10-Year Piotroski F-Score Range
Min: 3   Max: 7
Current: 4

3
7

During the past 12 years, the highest Piotroski F-Score of Discover Financial Services was 7. The lowest was 3. And the median was 5.


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 (Jun15) TTM:Last Year (Jun14) TTM:
Net Income was 644 + 404 + 586 + 599 = $2,233 Mil.
Cash Flow from Operations was 1055 + 1000 + 1063 + 600 = $3,718 Mil.
Revenue was 2190 + 2037 + 2171 + 2175 = $8,573 Mil.
Gross Profit was 0 + 0 + 0 + 0 = $0 Mil.
Average Total Assets from the begining of this year (Jun14)
to the end of this year (Jun15) was
(78937 + 80596 + 83126 + 84178 + 84911) / 5 = $82349.6 Mil.
Total Assets at the begining of this year (Jun14) was $78,937 Mil.
Long-Term Debt was $24,099 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 Mil.
Net Income was 593 + 602 + 631 + 644 = $2,470 Mil.

Revenue was 2062 + 2129 + 2078 + 2172 = $8,441 Mil.
Gross Profit was 0 + 0 + 0 + 0 = $0 Mil.
Average Total Assets from the begining of last year (Jun13)
to the end of last year (Jun14) was
(74944 + 75544 + 79340 + 79584 + 78937) / 5 = $77669.8 Mil.
Total Assets at the begining of last year (Jun13) was $74,944 Mil.
Long-Term Debt was $20,057 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.

Discover Financial Services's current net income (TTM) was 2,233. ==> 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.

Discover Financial Services's current cash flow from operations (TTM) was 3,718. ==> 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.

Discover Financial Services's return on assets of this year was 0.02828838. Discover Financial Services's return on assets of last year was 0.03295794. ==> 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.

Discover Financial Services's current net income (TTM) was 2,233. Discover Financial Services's current cash flow from operations (TTM) was 3,718. ==> 3,718 > 2,233 ==> 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: Jun15)=Long-Term Debt/Average Total Assets from Jun14 to Jun15
=24099/82349.6
=0.29264259

Gearing (Last Year: Jun14)=Long-Term Debt/Average Total Assets from Jun13 to Jun14
=20057/77669.8
=0.25823422

Discover Financial Services's gearing of this year was 0.29264259. Discover Financial Services's gearing of last year was 0.25823422. ==> 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: Jun15)=Total Current Assets/Total Current Liabilities
=0/0
=

Current Ratio (Last Year: Jun14)=Total Current Assets/Total Current Liabilities
=0/0
=

Discover Financial Services's current ratio of this year was . Discover Financial Services'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.

Discover Financial Services's number of shares in issue this year was 442. Discover Financial Services's number of shares in issue last year was 467. ==> 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
=0/8573
=0

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=0/8441
=0

Discover Financial Services's gross margin of this year was 0. Discover Financial Services's gross margin of last year was 0. ==> 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 (Jun14)
=8573/78937
=0.1086056

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Jun13)
=8441/74944
=0.11263076

Discover Financial Services's asset turnover of this year was 0.1086056. Discover Financial Services's asset turnover of last year was 0.11263076. ==> 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+1+0+0
=4

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

Discover Financial Services 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 own currency.

Discover Financial Services Annual Data

Nov09Nov10Nov11Nov12Dec13Dec14
Question 1 111111
Question 2 111111
Question 3 101010
Question 4 111111
Question 5 001100
Question 6 000000
Question 7 011111
Question 8 000000
Question 9 100010
F-score 546564

Discover Financial Services Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
Question 1 1111111111
Question 2 1111111111
Question 3 0001011000
Question 4 1111111111
Question 5 1110000000
Question 6 0000000000
Question 7 1111111111
Question 8 0000000000
Question 9 0001011000
F-score 5556466444
Get WordPress Plugins for easy affiliate links on Stock Tickers and Guru Names | Earn affiliate commissions by embedding GuruFocus Charts
GuruFocus Affiliate Program: Earn up to $400 per referral. ( Learn More)

GuruFocus Premium Plus Membership

FEEDBACK