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GuruFocus has detected 4 Warning Signs with Harley-Davidson Inc $HOG.
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Harley-Davidson Inc (NYSE:HOG)
Piotroski F-Score
4 (As of Today)

The zones of discrimination were as such:

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

Harley-Davidson Inc has an F-score of 4 indicating the company's financial situation is typical for a stable company.

HOG' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 9
Current: 4

2
9

During the past 13 years, the highest Piotroski F-Score of Harley-Davidson Inc was 9. The lowest was 2. 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 (Sep16) TTM:Last Year (Sep15) TTM:
Net Income was 42.196 + 250.489 + 280.431 + 114.065 = $687 Mil.
Cash Flow from Operations was 79.161 + 41.131 + 415.159 + 471.519 = $1,007 Mil.
Revenue was 1180.635 + 1749.968 + 1861.077 + 1274.813 = $6,066 Mil.
Gross Profit was 453.452 + 717.719 + 755.627 + 507.629 = $2,434 Mil.
Average Total Assets from the begining of this year (Sep15)
to the end of this year (Sep16) was
(10731.558 + 9991.167 + 10467.671 + 10348.44 + 10212.226) / 5 = $10350.2124 Mil.
Total Assets at the begining of this year (Sep15) was $10,732 Mil.
Long-Term Debt was $5,171 Mil.
Total Current Assets was $4,102 Mil.
Total Current Liabilities was $2,554 Mil.
Net Income was 74.475 + 269.854 + 299.81 + 140.347 = $784 Mil.

Revenue was 1200.157 + 1672.945 + 1824.392 + 1317.43 = $6,015 Mil.
Gross Profit was 438.48 + 714.114 + 779.635 + 529.934 = $2,462 Mil.
Average Total Assets from the begining of last year (Sep14)
to the end of last year (Sep15) was
(10025.506 + 9528.097 + 10247.86 + 10549.194 + 10731.558) / 5 = $10216.443 Mil.
Total Assets at the begining of last year (Sep14) was $10,026 Mil.
Long-Term Debt was $5,054 Mil.
Total Current Assets was $4,616 Mil.
Total Current Liabilities was $2,663 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.

Harley-Davidson Inc's current net income (TTM) was 687. ==> 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.

Harley-Davidson Inc's current cash flow from operations (TTM) was 1,007. ==> 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 (Sep15)
=687.181/10731.558
=0.06403367

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Sep14)
=784.486/10025.506
=0.07824902

Harley-Davidson Inc's return on assets of this year was 0.06403367. Harley-Davidson Inc's return on assets of last year was 0.07824902. ==> 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.

Harley-Davidson Inc's current net income (TTM) was 687. Harley-Davidson Inc's current cash flow from operations (TTM) was 1,007. ==> 1,007 > 687 ==> 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: Sep16)=Long-Term Debt/Average Total Assets from Sep15 to Sep16
=5170.609/10350.2124
=0.4995655

Gearing (Last Year: Sep15)=Long-Term Debt/Average Total Assets from Sep14 to Sep15
=5054.347/10216.443
=0.49472669

Harley-Davidson Inc's gearing of this year was 0.4995655. Harley-Davidson Inc's gearing of last year was 0.49472669. ==> 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: Sep16)=Total Current Assets/Total Current Liabilities
=4102.344/2553.707
=1.60642705

Current Ratio (Last Year: Sep15)=Total Current Assets/Total Current Liabilities
=4616.041/2663.005
=1.73339554

Harley-Davidson Inc's current ratio of this year was 1.60642705. Harley-Davidson Inc's current ratio of last year was 1.73339554. ==> 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.

Harley-Davidson Inc's number of shares in issue this year was 179.3. Harley-Davidson Inc's number of shares in issue last year was 204.6. ==> 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
=2434.427/6066.493
=0.40129066

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2462.163/6014.924
=0.40934233

Harley-Davidson Inc's gross margin of this year was 0.40129066. Harley-Davidson Inc's gross margin of last year was 0.40934233. ==> 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 (Sep15)
=6066.493/10731.558
=0.56529471

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep14)
=6014.924/10025.506
=0.59996214

Harley-Davidson Inc's asset turnover of this year was 0.56529471. Harley-Davidson Inc's asset turnover of last year was 0.59996214. ==> 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+0+1+0+0+1+0+0
=4

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

Harley-Davidson Inc has an F-score of 4 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


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

Harley-Davidson Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Question 1 1110111111
Question 2 1101111111
Question 3 1000111110
Question 4 0001111111
Question 5 1000110100
Question 6 0010101010
Question 7 1111001111
Question 8 0010101111
Question 9 1000011110
F-score 6343768885

Harley-Davidson Inc Quarterly Data

Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16
Question 1 1111111111
Question 2 1111111111
Question 3 1111000000
Question 4 1111111111
Question 5 1100000000
Question 6 0011110000
Question 7 1111111111
Question 8 1111111000
Question 9 1110000000
F-score 8887665444
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