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Education Management Corp (NAS:EDMC)
Piotroski F-Score
5 (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 Corp has an F-score of 5 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: 5

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 (Mar14) TTM:Last Year (Mar13) TTM:
Net Income was -25.619 + -9.514 + 1.089 + -467.646 = $-502 Mil.
Cash Flow from Operations was -94.895 + 127.207 + -87.517 + 132.485 = $77 Mil.
Revenue was 595.236 + 580.38 + 593.673 + 595.202 = $2,364 Mil.
Gross Profit was -851.861 + 222.692 + 248.086 + 595.202 = $214 Mil.
Average Total Assets from the begining of this year (Mar13)
to the end of this year (Mar14) was
(2457.362 + 2315.293 + 2521.629 + 2180.088 + 1877.35) / 5 = $2,270 Mil.
Total Assets was $1,877 Mil.
Long-Term Debt was $1,272 Mil.
Total Current Assets was $813 Mil.
Total Current Liabilities was $454 Mil.
Net Income was -1188.706 + -13.093 + 31.144 + -260.408 = $-1,431 Mil.

Revenue was 639.185 + 609.564 + 654.895 + 638.903 = $2,543 Mil.
Gross Profit was 269.25 + 228.268 + 294.518 + 638.903 = $1,431 Mil.
Average Total Assets from the begining of last year (Mar12)
to the end of last year (Mar13) was
(4119.379 + 2839.095 + 2896.485 + 2693.818 + 2457.362) / 5 = $3,001 Mil.
Total Assets was $2,457 Mil.
Long-Term Debt was $1,283 Mil.
Total Current Assets was $780 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 -502. ==> 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 77. ==> 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 Mar13 to Mar14
=-501.69/2270.3444
=-0.22097528

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Mar12 to Mar13
=-1431.063/3001.2278
=-0.47682585

Education Management Corp's return on assets of this year was -0.22097528. Education Management Corp's return on assets of last year was -0.47682585. ==> 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 Corp's current net income (ttm) was -502. Education Management Corp's current cash flow from operations (ttm) was 77. ==> 77 > -502 ==> 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: Mar14)=Long-Term Debt/Total Assets
=1271.986/1877.35
=0.67754335

Gearing (Last Year: Mar13)=Long-Term Debt/Total Assets
=1283.344/2457.362
=0.52224459

Education Management Corp's gearing of this year was 0.67754335. Education Management Corp's gearing of last year was 0.52224459. ==> 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: Mar14)=Total Current Assets/Total Current Liabilities
=812.524/454.021
=1.78961766

Current Ratio (Last Year: Mar13)=Total Current Assets/Total Current Liabilities
=779.561/486.402
=1.60270928

Education Management Corp's current ratio of this year was 1.78961766. Education Management Corp's current ratio of last year was 1.60270928. ==> 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.

Education Management Corp's number of shares in issue this year was 125.9. 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
=214.119/2364.491
=0.09055606

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1430.939/2542.547
=0.56279746

Education Management Corp's gross margin of this year was 0.09055606. Education Management Corp's gross margin of last year was 0.56279746. ==> 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 Mar13 to Mar14
=2364.491/2270.3444
=1.04146798

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Mar12 to Mar13
=2542.547/3001.2278
=0.84716895

Education Management Corp's asset turnover of this year was 1.04146798. Education Management Corp's asset turnover of last year was 0.84716895. ==> 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+1+0+0+1
=5

Good or high score = 8 or 9

Bad or low score = 0 or 1

Education Management Corp has an F-score of 5 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

Jun04Jun05Jun06Jun07Jun08Jun09Jun10Jun11Jun12Jun13
Q1 1111111100
Q2 1111111101
Q3 1100111101
Q4 1111111111
Q5 1001111100
Q6 0101111111
Q7 0011000011
Q8 1111111000
Q9 1111111100
F-score 7768888735

Education Management Corp Quarterly Data

Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14
Q1 1000000000
Q2 1100011111
Q3 0000001111
Q4 1111111111
Q5 1000000000
Q6 1111111001
Q7 1111111000
Q8 0000010000
Q9 1111111111
F-score 7544466445
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