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GuruFocus has detected 5 Warning Signs with Eastman Chemical Co $EMN.
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Eastman Chemical Co (NYSE:EMN)
Piotroski F-Score
7 (As of Today)

Good Sign:

Piotroski F-Score of 7 is 7, indicating very healthy situation.

The zones of discrimination were as such:

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Eastman Chemical Co has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.

EMN' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 9
Current: 7

4
9

During the past 13 years, the highest Piotroski F-Score of Eastman Chemical Co was 9. The lowest was 4. 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 251 + 255 + 232 + 116 = $854 Mil.
Cash Flow from Operations was 47 + 494 + 450 + 394 = $1,385 Mil.
Revenue was 2236 + 2297 + 2287 + 2188 = $9,008 Mil.
Gross Profit was 634 + 605 + 621 + 490 = $2,350 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(15580 + 15616 + 15582 + 15489 + 15457) / 5 = $15544.8 Mil.
Total Assets at the begining of this year (Dec15) was $15,580 Mil.
Long-Term Debt was $6,311 Mil.
Total Current Assets was $2,866 Mil.
Total Current Liabilities was $1,795 Mil.
Net Income was 171 + 297 + 256 + 124 = $848 Mil.

Revenue was 2443 + 2533 + 2447 + 2225 = $9,648 Mil.
Gross Profit was 656 + 720 + 695 + 509 = $2,580 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(16072 + 15834 + 15886 + 15880 + 15580) / 5 = $15850.4 Mil.
Total Assets at the begining of last year (Dec14) was $16,072 Mil.
Long-Term Debt was $6,577 Mil.
Total Current Assets was $2,878 Mil.
Total Current Liabilities was $2,056 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.

Eastman Chemical Co's current net income (TTM) was 854. ==> 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.

Eastman Chemical Co's current cash flow from operations (TTM) was 1,385. ==> 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.

Eastman Chemical Co's return on assets of this year was 0.05481386. Eastman Chemical Co's return on assets of last year was 0.05276257. ==> This year is higher. ==> Score 1.

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.

Eastman Chemical Co's current net income (TTM) was 854. Eastman Chemical Co's current cash flow from operations (TTM) was 1,385. ==> 1,385 > 854 ==> 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
=6311/15544.8
=0.40598785

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=6577/15850.4
=0.41494221

Eastman Chemical Co's gearing of this year was 0.40598785. Eastman Chemical Co's gearing of last year was 0.41494221. ==> This year is lower or equal to last year. ==> Score 1.

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
=2866/1795
=1.59665738

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=2878/2056
=1.39980545

Eastman Chemical Co's current ratio of this year was 1.59665738. Eastman Chemical Co's current ratio of last year was 1.39980545. ==> This year's current ratio is higher. ==> Score 1.

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.

Eastman Chemical Co's number of shares in issue this year was 148.4. Eastman Chemical Co's number of shares in issue last year was 149.8. ==> 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
=2350/9008
=0.26087922

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2580/9648
=0.26741294

Eastman Chemical Co's gross margin of this year was 0.26087922. Eastman Chemical Co's gross margin of last year was 0.26741294. ==> 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)
=9008/15580
=0.57817715

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=9648/16072
=0.60029866

Eastman Chemical Co's asset turnover of this year was 0.57817715. Eastman Chemical Co's asset turnover of last year was 0.60029866. ==> 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+1+1+1+1+1+0+0
=7

Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3

Eastman Chemical Co has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.


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.

Eastman Chemical Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0101101001
Question 4 1111011111
Question 5 1001101011
Question 6 0010100001
Question 7 0110100111
Question 8 0011001010
Question 9 0101110100
F-score 4667746567

Eastman Chemical Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 1000001001
Question 4 1111111111
Question 5 0000011111
Question 6 0000000001
Question 7 1111111111
Question 8 1000011110
Question 9 1110100000
F-score 7554567667
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