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GuruFocus has detected 5 Warning Signs with Esterline Technologies Corp $ESL.
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Esterline Technologies Corp (NYSE:ESL)
Piotroski F-Score
8 (As of Today)

Good Sign:

Piotroski F-Score of 8 is 8, 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

Esterline Technologies Corp has an F-score of 8. It is a good or high score, which usually indicates a very healthy situation.

ESL' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 8
Current: 8

3
8

During the past 13 years, the highest Piotroski F-Score of Esterline Technologies 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 local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 14.973 + 29.356 + 52.272 + 16.189 = $113 Mil.
Cash Flow from Operations was 39.232 + 38.728 + 48.546 + 45.535 = $172 Mil.
Revenue was 490.31 + 517.092 + 543.752 + 457.733 = $2,009 Mil.
Gross Profit was 156.173 + 173.584 + 193.769 + 144.047 = $668 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(2919.322 + 3012.04 + 3004.117 + 3032.031 + 2927.8) / 5 = $2979.062 Mil.
Total Assets at the begining of this year (Dec15) was $2,919 Mil.
Long-Term Debt was $821 Mil.
Total Current Assets was $1,140 Mil.
Total Current Liabilities was $367 Mil.
Net Income was 19.81 + 28.497 + 2.986 + 5.084 = $56 Mil.

Revenue was 500.08 + 496.217 + 331.808 + 441.477 = $1,770 Mil.
Gross Profit was 163.651 + 169.796 + 110.596 + 137.719 = $582 Mil.
Average Total Assets from the begining of last year (Jan15)
to the end of last year (Dec15) was
(3083.39 + 3176.368 + 3085.652 + 3007.03 + 2919.322) / 5 = $3054.3524 Mil.
Total Assets at the begining of last year (Jan15) was $3,083 Mil.
Long-Term Debt was $831 Mil.
Total Current Assets was $1,099 Mil.
Total Current Liabilities was $399 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.

Esterline Technologies Corp's current net income (TTM) was 113. ==> 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.

Esterline Technologies Corp's current cash flow from operations (TTM) was 172. ==> 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 (Dec15)
=112.79/2919.322
=0.03863568

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Jan15)
=56.377/3083.39
=0.0182841

Esterline Technologies Corp's return on assets of this year was 0.03863568. Esterline Technologies Corp's return on assets of last year was 0.0182841. ==> 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.

Esterline Technologies Corp's current net income (TTM) was 113. Esterline Technologies Corp's current cash flow from operations (TTM) was 172. ==> 172 > 113 ==> 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
=821.441/2979.062
=0.27573814

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Jan15 to Dec15
=831.358/3054.3524
=0.27218798

Esterline Technologies Corp's gearing of this year was 0.27573814. Esterline Technologies Corp's gearing of last year was 0.27218798. ==> Last year is lower than this year ==> Score 0.

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
=1140.408/367.199
=3.10569473

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=1098.528/398.737
=2.75501897

Esterline Technologies Corp's current ratio of this year was 3.10569473. Esterline Technologies Corp's current ratio of last year was 2.75501897. ==> 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.

Esterline Technologies Corp's number of shares in issue this year was 29.8. Esterline Technologies Corp's number of shares in issue last year was 29.9. ==> 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
=667.573/2008.887
=0.33230988

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=581.762/1769.582
=0.32875673

Esterline Technologies Corp's gross margin of this year was 0.33230988. Esterline Technologies Corp's gross margin of last year was 0.32875673. ==> This year's gross margin is higher. ==> Score 1.

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)
=2008.887/2919.322
=0.68813478

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Jan15)
=1769.582/3083.39
=0.57390794

Esterline Technologies Corp's asset turnover of this year was 0.68813478. Esterline Technologies Corp's asset turnover of last year was 0.57390794. ==> This year's asset turnover is higher. ==> Score 1.

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+0+1+1+1+1
=8

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

Esterline Technologies Corp has an F-score of 8. 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.

Esterline Technologies Corp Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Sep15Sep16
Question 1 1111111111
Question 2 1111111111
Question 3 1010001001
Question 4 1011111111
Question 5 0100011100
Question 6 1111011101
Question 7 0000000011
Question 8 0101111000
Question 9 1000101101
F-score 6555568647

Esterline Technologies Corp Quarterly Data

Oct14Jan15Apr15Jul15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0000000111
Question 4 1111111111
Question 5 1000000100
Question 6 1100000011
Question 7 0111111111
Question 8 0000000001
Question 9 1100000011
F-score 6644444678
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