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Discover Financial Services (NYSE:DFS)
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

Discover Financial Services has an F-score of 6 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: 6

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 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 (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was 593 + 602 + 631 + 644 = $2,470 Mil.
Cash Flow from Operations was 448 + 982 + 1129 + 642 = $3,201 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 this year (Jun13)
to the end of this year (Jun14) was
(74944 + 75544 + 79340 + 79584 + 78937) / 5 = $77,670 Mil.
Total Assets was $78,937 Mil.
Long-Term Debt was $20,057 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 Mil.
Net Income was 550.717 + 539 + 673 + 602 = $2,365 Mil.

Revenue was 1998.07 + 2016 + 1992 + 2041 = $8,047 Mil.
Gross Profit was 0 + 0 + 0 + 0 = $0 Mil.
Average Total Assets from the begining of last year (Aug12)
to the end of last year (Jun13) was
(73908.664 + 75283 + 73491 + 76139 + 74944) / 5 = $74,753 Mil.
Total Assets was $74,944 Mil.
Long-Term Debt was $18,033 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 Mil.

Profitability

Q1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by average total assets throughout the year.

Score 1 if positive, 0 if negative.

Discover Financial Services's current net income (ttm) was 2,470. ==> Positive ==> Score 1.

Q2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by average total assets throughout the year.

Score 1 if positive, 0 if negative.

Discover Financial Services's current cash flow from operations (ttm) was 3,201. ==> 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 (TTM)/Average Total Assets from Jun13 to Jun14
=2470/77669.8
=0.03180129

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Aug12 to Jun13
=2364.717/74753.1328
=0.03163368

Discover Financial Services's return on assets of this year was 0.03180129. Discover Financial Services's return on assets of last year was 0.03163368. ==> 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.

Discover Financial Services's current net income (ttm) was 2,470. Discover Financial Services's current cash flow from operations (ttm) was 3,201. ==> 3,201 > 2,470 ==> CFROA > ROA ==> Score 1.

Funding

Q5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Jun14)=Long-Term Debt/Total Assets
=20057/78937
=0.2540887

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=18033/74944
=0.24061966

Discover Financial Services's gearing of this year was 0.2540887. Discover Financial Services's gearing of last year was 0.24061966. ==> Last year is lower than this year ==> 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: Jun14)=Total Current Assets/Total Current Liabilities
=0/0
=

Current Ratio (Last Year: Jun13)=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.

Q7. 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 467. Discover Financial Services's number of shares in issue last year was 490. ==> There is smaller number of shares in issue this year, or the same. ==> 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: TTM)=Gross Profit/Revenue
=0/8441
=0

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=0/8047.07
=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.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by average total assets throughout 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)/Average Total Assets from Jun13 to Jun14
=8441/77669.8
=0.10867802

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Aug12 to Jun13
=8047.07/74753.1328
=0.1076486

Discover Financial Services's asset turnover of this year was 0.10867802. Discover Financial Services's asset turnover of last year was 0.1076486. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+1+1+0+0+1+0+1
=6

Good or high score = 8 or 9

Bad or low score = 0 or 1

Discover Financial Services 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, Altman Z-Score, Beneish M-Score


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

Nov05Nov06Nov07Nov08Nov09Nov10Nov11Nov12Dec12Dec13
Q1 11111111
Q2 11111101
Q3 0101111
Q4 1111101
Q5 1001110
Q6 0000000
Q7 0001111
Q8 0000000
Q9 0101111
F-score 4537756

Discover Financial Services Quarterly Data

May12Aug12Nov12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 1111111111
Q2 1111111111
Q3 1000000101
Q4 1110111111
Q5 1111111000
Q6 0000000000
Q7 1111111111
Q8 0000000000
Q9 0000111111
F-score 6554666656
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