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Demand Media Inc (NYSE:DMD)
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 = 8 or 9
Bad or low score = 0 or 1

Demand Media Inc has an F-score of 3 indicating the company's financial situation is typical for a stable company.

DMD' s 10-Year Piotroski F-Score Range
Min: 3   Max: 8
Current: 3

3
8

During the past 6 years, the highest Piotroski F-Score of Demand Media Inc was 8. 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 (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was -10.44 + -11.521 + -10.956 + -14.333 = $-47.3 Mil.
Cash Flow from Operations was 18.814 + 9.735 + 5.688 + 12.454 = $46.7 Mil.
Revenue was 96.251 + 96.661 + 89.752 + 89.766 = $372.4 Mil.
Gross Profit was 43.367 + 41.534 + 35.66 + 33.451 = $154.0 Mil.
Average Total Assets from the begining of this year (Jun13)
to the end of this year (Jun14) was
(705.829 + 738.076 + 777.088 + 772.578 + 748.717) / 5 = $748.5 Mil.
Total Assets was $748.7 Mil.
Long-Term Debt was $73.8 Mil.
Total Current Assets was $259.0 Mil.
Total Current Liabilities was $166.1 Mil.
Net Income was 3.175 + 4.749 + 0.669 + 1.118 = $9.7 Mil.

Revenue was 98.147 + 103.142 + 100.62 + 101.066 = $403.0 Mil.
Gross Profit was 51.623 + 54.277 + 52.443 + 52.491 = $210.8 Mil.
Average Total Assets from the begining of last year (Jun12)
to the end of last year (Jun13) was
(617.435 + 631.041 + 637.997 + 651.7 + 705.829) / 5 = $648.8 Mil.
Total Assets was $705.8 Mil.
Long-Term Debt was $20.0 Mil.
Total Current Assets was $180.0 Mil.
Total Current Liabilities was $150.0 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.

Demand Media Inc's current net income (ttm) was -47.3. ==> Negative ==> Score 0.

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.

Demand Media Inc's current cash flow from operations (ttm) was 46.7. ==> 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
=-47.25/748.4576
=-0.06312983

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Jun12 to Jun13
=9.711/648.8004
=0.01496762

Demand Media Inc's return on assets of this year was -0.06312983. Demand Media Inc's return on assets of last year was 0.01496762. ==> Last year is higher ==> Score 0.

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.

Demand Media Inc's current net income (ttm) was -47.3. Demand Media Inc's current cash flow from operations (ttm) was 46.7. ==> 46.7 > -47.3 ==> 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
=73.75/748.717
=0.09850184

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=20/705.829
=0.02833548

Demand Media Inc's gearing of this year was 0.09850184. Demand Media Inc's gearing of last year was 0.02833548. ==> 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
=258.964/166.051
=1.55954496

Current Ratio (Last Year: Jun13)=Total Current Assets/Total Current Liabilities
=180.01/149.973
=1.20028272

Demand Media Inc's current ratio of this year was 1.55954496. Demand Media Inc's current ratio of last year was 1.20028272. ==> 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 0 if there is larger number of shares in issue this year, 1 otherwise.

Demand Media Inc's number of shares in issue this year was 18.3. Demand Media Inc's number of shares in issue last year was 17.7. ==> There is larger 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: TTM)=Gross Profit/Revenue
=154.012/372.43
=0.41353274

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=210.834/402.975
=0.52319375

Demand Media Inc's gross margin of this year was 0.41353274. Demand Media Inc's gross margin of last year was 0.52319375. ==> 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
=372.43/748.4576
=0.49759666

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Jun12 to Jun13
=402.975/648.8004
=0.62110782

Demand Media Inc's asset turnover of this year was 0.49759666. Demand Media Inc's asset turnover of last year was 0.62110782. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=0+1+0+1+0+1+0+0+0
=3

Good or high score = 8 or 9

Bad or low score = 0 or 1

Demand Media Inc has an F-score of 3 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.

Demand Media Inc Annual Data

Dec08Dec09Dec10Dec11Dec12Dec13
Q1 10
Q2 11
Q3 10
Q4 11
Q5 10
Q6 11
Q7 00
Q8 10
Q9 11
F-score 84

Demand Media Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 001110000
Q2 111111111
Q3 011111000
Q4 111111111
Q5 111100000
Q6 011100111
Q7 000000000
Q8 111110000
Q9 111110000
F-score 0578863333
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