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ITT Educational Services, Inc. (NYSE:ESI)
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 = 7, 8, 9
Bad or low score = 0, 1, 2, 3

ITT Educational Services, Inc. has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

ESI' 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 ITT Educational Services, Inc. was 8. The lowest was 3. And the median was 7.


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 (Sep14) TTM:Last Year (Sep13) TTM:
Net Income was -39.381 + 3.622 + 0.392 + 10.322 = $-25 Mil.
Cash Flow from Operations was 61.422 + 36.918 + 21.563 + 33.122 = $153 Mil.
Revenue was 267.173 + 237.923 + 238.096 + 242.561 = $986 Mil.
Gross Profit was 148.741 + 117.808 + 121.82 + 125.022 = $513 Mil.
Average Total Assets from the begining of this year (Sep13)
to the end of this year (Sep14) was
(739.302 + 806.851 + 778.431 + 776.219 + 767.506) / 5 = $773.6618 Mil.
Total Assets at the begining of this year (Sep13) was $739 Mil.
Long-Term Debt was $146 Mil.
Total Current Assets was $389 Mil.
Total Current Liabilities was $438 Mil.
Net Income was -10.074 + -17.271 + 20.204 + 9.424 = $2 Mil.

Revenue was 305.572 + 285.062 + 260.459 + 259.617 = $1,111 Mil.
Gross Profit was 176.178 + 160.886 + 136.918 + 139.413 = $613 Mil.
Average Total Assets from the begining of last year (Sep12)
to the end of last year (Sep13) was
(587.508 + 675.204 + 783.286 + 767.578 + 739.302) / 5 = $710.5756 Mil.
Total Assets at the begining of last year (Sep12) was $588 Mil.
Long-Term Debt was $154 Mil.
Total Current Assets was $400 Mil.
Total Current Liabilities was $405 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.

ITT Educational Services, Inc.'s current net income (TTM) was -25. ==> Negative ==> Score 0.

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.

ITT Educational Services, Inc.'s current cash flow from operations (TTM) was 153. ==> 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.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Sep13)
=-25.045/739.302
=-0.03387655

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Sep12)
=2.283/587.508
=0.0038859

ITT Educational Services, Inc.'s return on assets of this year was -0.03387655. ITT Educational Services, Inc.'s return on assets of last year was 0.0038859. ==> 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.

ITT Educational Services, Inc.'s current net income (TTM) was -25. ITT Educational Services, Inc.'s current cash flow from operations (TTM) was 153. ==> 153 > -25 ==> 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: Sep14)=Long-Term Debt/Average Total Assets from Sep13 to Sep14
=145.88/773.6618
=0.18855784

Gearing (Last Year: Sep13)=Long-Term Debt/Average Total Assets from Sep12 to Sep13
=154.42/710.5756
=0.21731678

ITT Educational Services, Inc.'s gearing of this year was 0.18855784. ITT Educational Services, Inc.'s gearing of last year was 0.21731678. ==> 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: Sep14)=Total Current Assets/Total Current Liabilities
=388.658/437.669
=0.88801811

Current Ratio (Last Year: Sep13)=Total Current Assets/Total Current Liabilities
=399.875/405.387
=0.98640312

ITT Educational Services, Inc.'s current ratio of this year was 0.88801811. ITT Educational Services, Inc.'s current ratio of last year was 0.98640312. ==> 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.

ITT Educational Services, Inc.'s number of shares in issue this year was 23.7. ITT Educational Services, Inc.'s number of shares in issue last year was 23.6. ==> There is larger number of shares in issue this year. ==> Score 0.

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
=513.391/985.753
=0.52081099

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=613.395/1110.71
=0.55225486

ITT Educational Services, Inc.'s gross margin of this year was 0.52081099. ITT Educational Services, Inc.'s gross margin of last year was 0.55225486. ==> 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 (Sep13)
=985.753/739.302
=1.33335633

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep12)
=1110.71/587.508
=1.89054447

ITT Educational Services, Inc.'s asset turnover of this year was 1.33335633. ITT Educational Services, Inc.'s asset turnover of last year was 1.89054447. ==> 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
=0+1+0+1+1+0+0+0+0
=3

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

ITT Educational Services, Inc. has an F-score of 3. It is a bad or low score, which usually implies poor business operation.


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.

ITT Educational Services, Inc. Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Question 1 1111111110
Question 2 1111111111
Question 3 0101111000
Question 4 1111011101
Question 5 1100111111
Question 6 1100100100
Question 7 0011111111
Question 8 1111111000
Question 9 0001111000
F-score 6757888644

ITT Educational Services, Inc. Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
Question 1 1111110000
Question 2 1111111111
Question 3 0000000000
Question 4 0000111111
Question 5 0100001111
Question 6 1101100000
Question 7 1111000000
Question 8 0000000000
Question 9 0000000000
F-score 4534433333
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