Switch to:
GuruFocus has detected 5 Warning Signs with Dow Chemical Co $DOW.
More than 500,000 people have already joined GuruFocus to track the stocks they follow and exchange investment ideas.
Dow Chemical Co (NYSE:DOW)
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

Dow Chemical Co has an F-score of 4 indicating the company's financial situation is typical for a stable company.

DOW' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 7
Current: 4

3
7

During the past 13 years, the highest Piotroski F-Score of Dow Chemical Co 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 local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 254 + 3208 + 804 + 52 = $4,318 Mil.
Cash Flow from Operations was 52 + 2218 + 1345 + 1863 = $5,478 Mil.
Revenue was 10703 + 11952 + 12483 + 13020 = $48,158 Mil.
Gross Profit was 2752 + 2677 + 2642 + 2446 = $10,517 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(67938 + 68440 + 81524 + 80624 + 79511) / 5 = $75607.4 Mil.
Total Assets at the begining of this year (Dec15) was $67,938 Mil.
Long-Term Debt was $20,456 Mil.
Total Current Assets was $23,659 Mil.
Total Current Liabilities was $12,604 Mil.
Net Income was 1478 + 1220 + 1375 + 3612 = $7,685 Mil.

Revenue was 12370 + 12910 + 12036 + 11462 = $48,778 Mil.
Gross Profit was 2835 + 2764 + 2687 + 2656 = $10,942 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(68687 + 67789 + 69334 + 69884 + 67938) / 5 = $68726.4 Mil.
Total Assets at the begining of last year (Dec14) was $68,687 Mil.
Long-Term Debt was $16,215 Mil.
Total Current Assets was $23,941 Mil.
Total Current Liabilities was $11,115 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.

Dow Chemical Co's current net income (TTM) was 4,318. ==> 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.

Dow Chemical Co's current cash flow from operations (TTM) was 5,478. ==> 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.

Dow Chemical Co's return on assets of this year was 0.06355795. Dow Chemical Co's return on assets of last year was 0.11188434. ==> 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.

Dow Chemical Co's current net income (TTM) was 4,318. Dow Chemical Co's current cash flow from operations (TTM) was 5,478. ==> 5,478 > 4,318 ==> 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: Dec16)=Long-Term Debt/Average Total Assets from Dec15 to Dec16
=20456/75607.4
=0.27055553

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=16215/68726.4
=0.23593554

Dow Chemical Co's gearing of this year was 0.27055553. Dow Chemical Co's gearing of last year was 0.23593554. ==> 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: Dec16)=Total Current Assets/Total Current Liabilities
=23659/12604
=1.87710251

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=23941/11115
=2.15393612

Dow Chemical Co's current ratio of this year was 1.87710251. Dow Chemical Co's current ratio of last year was 2.15393612. ==> 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.

Dow Chemical Co's number of shares in issue this year was 1123.2. Dow Chemical Co's number of shares in issue last year was 1241.4. ==> 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
=10517/48158
=0.21838532

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=10942/48778
=0.22432244

Dow Chemical Co's gross margin of this year was 0.21838532. Dow Chemical Co's gross margin of last year was 0.22432244. ==> 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 (Dec15)
=48158/67938
=0.70885219

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=48778/68687
=0.71014894

Dow Chemical Co's asset turnover of this year was 0.70885219. Dow Chemical Co's asset turnover of last year was 0.71014894. ==> 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

Dow Chemical Co 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 local exchange's currency.

Dow Chemical Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0011101010
Question 4 1111111101
Question 5 1001101010
Question 6 0011011110
Question 7 1100000101
Question 8 0011111110
Question 9 1100100100
F-score 6567757764

Dow Chemical Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0001111110
Question 4 1111100001
Question 5 0000111000
Question 6 1100011110
Question 7 1100001111
Question 8 1111111110
Question 9 0100100000
F-score 6745767664
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)
FEEDBACK