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Education Management Corp (NAS:EDMC)
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

Education Management Corp has an F-score of 3 indicating the company's financial situation is typical for a stable company.

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

3
8

During the past 13 years, the highest Piotroski F-Score of Education Management Corp was 8. 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 -9.514 + 1.089 + -467.646 + -187.845 = $-664 Mil.
Cash Flow from Operations was 127.207 + -87.517 + 132.485 + -101.529 = $71 Mil.
Revenue was 580.38 + 593.673 + 595.202 + 503.481 = $2,273 Mil.
Gross Profit was 222.692 + 248.086 + 595.202 + -870.218 = $196 Mil.
Average Total Assets from the begining of this year (Jun13)
to the end of this year (Jun14) was
(2423.356 + 2521.629 + 2180.088 + 1877.35 + 1877.036) / 5 = $2,176 Mil.
Total Assets was $1,877 Mil.
Long-Term Debt was $1,272 Mil.
Total Current Assets was $876 Mil.
Total Current Liabilities was $635 Mil.
Net Income was -13.093 + 31.144 + -260.408 + -2.033 = $-244 Mil.

Revenue was 609.564 + 654.895 + 638.903 + 595.236 = $2,499 Mil.
Gross Profit was 228.268 + 294.518 + 638.903 + -851.861 = $310 Mil.
Average Total Assets from the begining of last year (Jun12)
to the end of last year (Jun13) was
(2839.095 + 2896.485 + 2693.818 + 2457.362 + 2423.356) / 5 = $2,662 Mil.
Total Assets was $2,423 Mil.
Long-Term Debt was $1,273 Mil.
Total Current Assets was $772 Mil.
Total Current Liabilities was $486 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.

Education Management Corp's current net income (ttm) was -664. ==> 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.

Education Management Corp's current cash flow from operations (ttm) was 71. ==> 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
=-663.916/2175.8918
=-0.30512363

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Jun12 to Jun13
=-244.39/2662.0232
=-0.09180611

Education Management Corp's return on assets of this year was -0.30512363. Education Management Corp's return on assets of last year was -0.09180611. ==> 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.

Education Management Corp's current net income (ttm) was -664. Education Management Corp's current cash flow from operations (ttm) was 71. ==> 71 > -664 ==> 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
=1271.586/1877.036
=0.67744359

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=1273.164/2423.356
=0.52537225

Education Management Corp's gearing of this year was 0.67744359. Education Management Corp's gearing of last year was 0.52537225. ==> 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
=875.966/635.325
=1.37876835

Current Ratio (Last Year: Jun13)=Total Current Assets/Total Current Liabilities
=771.619/486.098
=1.58737333

Education Management Corp's current ratio of this year was 1.37876835. Education Management Corp's current ratio of last year was 1.58737333. ==> 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.

Education Management Corp's number of shares in issue this year was 126. Education Management Corp's number of shares in issue last year was 124.6. ==> 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
=195.762/2272.736
=0.08613495

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=309.828/2498.598
=0.12400074

Education Management Corp's gross margin of this year was 0.08613495. Education Management Corp's gross margin of last year was 0.12400074. ==> 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
=2272.736/2175.8918
=1.04450782

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Jun12 to Jun13
=2498.598/2662.0232
=0.93860865

Education Management Corp's asset turnover of this year was 1.04450782. Education Management Corp's asset turnover of last year was 0.93860865. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

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

Good or high score = 8 or 9

Bad or low score = 0 or 1

Education Management Corp 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.

Education Management Corp Annual Data

Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14
Q1 1111111000
Q2 1111111011
Q3 1001111010
Q4 1111111111
Q5 0011111000
Q6 1011111110
Q7 0110000110
Q8 1111110000
Q9 1111111000
F-score 7688887352

Education Management Corp Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 0000000000
Q2 1000111111
Q3 0000011110
Q4 1111111111
Q5 0000000000
Q6 1111110010
Q7 1111110000
Q8 0000100000
Q9 1111111111
F-score 5444664453
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