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GuruFocus has detected 3 Warning Signs with E*TRADE Financial Corp $ETFC.
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E*TRADE Financial Corp (NAS:ETFC)
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

E*TRADE Financial Corp has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.

ETFC' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 7
Current: 7

2
7

During the past 13 years, the highest Piotroski F-Score of E*TRADE Financial Corp was 7. The lowest was 2. And the median was 4.


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 153 + 133 + 139 + 127 = $552 Mil.
Cash Flow from Operations was 96 + 231 + 401 + 897 = $1,625 Mil.
Revenue was 472 + 474 + 486 + 509 = $1,941 Mil.
Gross Profit was 472 + 474 + 486 + 509 = $1,941 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(45427 + 47943 + 49202 + 49199 + 48999) / 5 = $48154 Mil.
Total Assets at the begining of this year (Dec15) was $45,427 Mil.
Long-Term Debt was $1,403 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 Mil.
Net Income was 40 + 292 + -153 + 89 = $268 Mil.

Revenue was 441 + 429 + 61 + 439 = $1,370 Mil.
Gross Profit was 441 + 429 + 61 + 439 = $1,370 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(45530 + 46825 + 47115 + 41205 + 45427) / 5 = $45220.4 Mil.
Total Assets at the begining of last year (Dec14) was $45,530 Mil.
Long-Term Debt was $1,488 Mil.
Total Current Assets was $0 Mil.
Total Current Liabilities was $0 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.

E*TRADE Financial Corp's current net income (TTM) was 552. ==> 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.

E*TRADE Financial Corp's current cash flow from operations (TTM) was 1,625. ==> 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.

E*TRADE Financial Corp's return on assets of this year was 0.01215136. E*TRADE Financial Corp's return on assets of last year was 0.00588623. ==> 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.

E*TRADE Financial Corp's current net income (TTM) was 552. E*TRADE Financial Corp's current cash flow from operations (TTM) was 1,625. ==> 1,625 > 552 ==> 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
=1403/48154
=0.02913569

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=1488/45220.4
=0.0329055

E*TRADE Financial Corp's gearing of this year was 0.02913569. E*TRADE Financial Corp's gearing of last year was 0.0329055. ==> 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
=0/0
=

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=0/0
=

E*TRADE Financial Corp's current ratio of this year was . E*TRADE Financial Corp's current ratio of last year was . ==> 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.

E*TRADE Financial Corp's number of shares in issue this year was 279. E*TRADE Financial Corp's number of shares in issue last year was 295. ==> 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
=1941/1941
=1

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1370/1370
=1

E*TRADE Financial Corp's gross margin of this year was 1. E*TRADE Financial Corp's gross margin of last year was 1. ==> 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)
=1941/45427
=0.04272789

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=1370/45530
=0.03009005

E*TRADE Financial Corp's asset turnover of this year was 0.04272789. E*TRADE Financial Corp's asset turnover of last year was 0.03009005. ==> 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+1+0+1+0+1
=7

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

E*TRADE Financial Corp 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.

E*TRADE Financial Corp Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 0000101111
Question 2 1111101111
Question 3 0101101101
Question 4 1111101111
Question 5 0111110011
Question 6 0000000000
Question 7 1000010001
Question 8 0000000000
Question 9 0110101101
F-score 3544625547

E*TRADE Financial Corp Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 1111001011
Question 4 1111111111
Question 5 0011111111
Question 6 0000000000
Question 7 0000101111
Question 8 0000000000
Question 9 1100000011
F-score 5555546577
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