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Education Management Corporation (NAS:EDMC)
Piotroski F-Score
4 (As of Today)

The zones of discrimination were as such:

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

Education Management Corporation has an F-score of 4 indicating the company's financial situation is typical for a stable company.

EDMC' s 10-Year Piotroski F-Score Range
Min: 3   Max: 9
Current: 4

3
9

During the past 13 years, the highest Piotroski F-Score of Education Management Corporation was 9. 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 (Dec13) TTM:Last Year (Dec12) TTM:
Net Income was 1.089 + -9.514 + -2.033 + -283.994 = $-294 Mil.
Cash Flow from Operations was -87.517 + 127.207 + -94.895 + 193.025 = $138 Mil.
Revenue was 593.673 + 580.38 + 595.236 + 638.903 = $2,408 Mil.
Gross Profit was 248.086 + 222.692 + 239.947 + 288.769 = $999 Mil.
Total Assets at the begining of this year (Dec12) was $2,694 Mil.
Total Assets was $2,180 Mil.
Long-Term Debt was $1,272 Mil.
Total Current Assets was $679 Mil.
Total Current Liabilities was $359 Mil.
Net Income was 31.144 + -13.093 + -1188.706 + -417.116 = $-1,588 Mil.

Revenue was 654.895 + 609.564 + 639.185 + 702.499 = $2,606 Mil.
Gross Profit was 294.518 + 228.268 + 269.25 + 320.295 = $1,112 Mil.
Total Assets at the begining of last year (Dec11) was $4,437 Mil.
Total Assets was $2,694 Mil.
Long-Term Debt was $1,448 Mil.
Total Current Assets was $786 Mil.
Total Current Liabilities was $369 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.

Education Management Corporation's current net income was -294. ==> Negative ==> Score 0.

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.

Education Management Corporation's current cash flow from operations was 138. ==> 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 (Dec12)
=-294.452/2693.818
=-0.10930657

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Dec11)
=-1587.771/4437.007
=-0.35784731

Education Management Corporation's return on assets of this year was -0.10930657. Education Management Corporation's return on assets of last year was -0.35784731. ==> 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.

Education Management Corporation's current net income was -294. Education Management Corporation's current cash flow from operations was 138. ==> 138 > -294 ==> CFROA > ROA ==> Score 1.

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
=1272.387/2180.088
=0.5836402

Gearing (Last Year)=Long-Term Debt/Total Assets
=1447.699/2693.818
=0.5374153

Education Management Corporation's gearing of this year was 0.5836402. Education Management Corporation's gearing of last year was 0.5374153. ==> Last year is lower ==> 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)=Total Current Assets/Total Current Liabilities
=679.457/359.389
=1.89058931

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=786.068/368.982
=2.1303695

Education Management Corporation's current ratio of this year was 1.89058931. Education Management Corporation's current ratio of last year was 2.1303695. ==> 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 1 if there is fewer number of shares in issue this year. Score 0 otherwise.

Education Management Corporation's number of shares in issue this year was 131. Education Management Corporation's number of shares in issue last year was 124.8. ==> 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
=999.494/2408.192
=0.41503917

Gross Margin (Last Year)=Gross Profit/Revenue
=1112.331/2606.143
=0.42681119

Education Management Corporation's gross margin of this year was 0.41503917. Education Management Corporation's gross margin of last year was 0.42681119. ==> Last year's gross margin is higher ==> Score 0.

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 (Dec12)
=2408.192/2693.818
=0.89396982

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Dec11)
=2606.143/4437.007
=0.58736509

Education Management Corporation's asset turnover of this year was 0.89396982. Education Management Corporation's asset turnover of last year was 0.58736509. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=0+1+1+1+0+0+0+0+1
=4

Good or high score = 8 or 9

Bad or low score = 0 or 1

Education Management Corporation 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.

Education Management Corporation Annual Data

Jun04Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13
Q1 1111111100
Q2 1111111101
Q3 1000111101
Q4 1111111111
Q5 1001111100
Q6 0101111111
Q7 0011000011
Q8 1111111000
Q9 1000111101
F-score 7557888736

Education Management Corporation Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Q1 1100000000
Q2 1110001111
Q3 1000000111
Q4 1111111111
Q5 1100000000
Q6 1111111100
Q7 1111111100
Q8 0000000000
Q9 1000001111
F-score 8643335644
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