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GuruFocus has detected 7 Warning Signs with The Hershey Co $HSY.
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The Hershey Co (NYSE:HSY)
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

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

HSY' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 8
Current: 7

4
8

During the past 13 years, the highest Piotroski F-Score of The Hershey Co was 8. The lowest was 4. 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 local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 229.832 + 145.956 + 227.403 + 116.853 = $720 Mil.
Cash Flow from Operations was 257.115 + 89.983 + 75.441 + 560.936 = $983 Mil.
Revenue was 1828.812 + 1637.671 + 2003.454 + 1970.244 = $7,440 Mil.
Gross Profit was 817.376 + 747.398 + 850.848 + 742.269 = $3,158 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(5344.371 + 5305.84 + 5567.384 + 5845.413 + 5524.333) / 5 = $5517.4682 Mil.
Total Assets at the begining of this year (Dec15) was $5,344 Mil.
Long-Term Debt was $2,347 Mil.
Total Current Assets was $1,817 Mil.
Total Current Liabilities was $1,909 Mil.
Net Income was 244.737 + -99.941 + 154.771 + 213.384 = $513 Mil.

Revenue was 1937.8 + 1578.825 + 1960.779 + 1909.222 = $7,387 Mil.
Gross Profit was 900.843 + 735.408 + 892.064 + 854.36 = $3,383 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(5622.87 + 5757.462 + 5449.33 + 5630.62 + 5344.371) / 5 = $5560.9306 Mil.
Total Assets at the begining of last year (Dec14) was $5,623 Mil.
Long-Term Debt was $1,557 Mil.
Total Current Assets was $1,849 Mil.
Total Current Liabilities was $2,218 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.

The Hershey Co's current net income (TTM) was 720. ==> 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.

The Hershey Co's current cash flow from operations (TTM) was 983. ==> 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)
=720.044/5344.371
=0.13472942

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=512.951/5622.87
=0.09122583

The Hershey Co's return on assets of this year was 0.13472942. The Hershey Co's return on assets of last year was 0.09122583. ==> 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.

The Hershey Co's current net income (TTM) was 720. The Hershey Co's current cash flow from operations (TTM) was 983. ==> 983 > 720 ==> 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
=2347.455/5517.4682
=0.42545873

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=1557.091/5560.9306
=0.28000547

The Hershey Co's gearing of this year was 0.42545873. The Hershey Co's gearing of last year was 0.28000547. ==> 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
=1816.778/1909.443
=0.95147014

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=1848.598/2217.912
=0.83348573

The Hershey Co's current ratio of this year was 0.95147014. The Hershey Co's current ratio of last year was 0.83348573. ==> 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.

The Hershey Co's number of shares in issue this year was 215.3. The Hershey Co's number of shares in issue last year was 220.7. ==> 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
=3157.891/7440.181
=0.42443739

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=3382.675/7386.626
=0.45794589

The Hershey Co's gross margin of this year was 0.42443739. The Hershey Co's gross margin of last year was 0.45794589. ==> 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)
=7440.181/5344.371
=1.39215279

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=7386.626/5622.87
=1.3136754

The Hershey Co's asset turnover of this year was 1.39215279. The Hershey Co's asset turnover of last year was 1.3136754. ==> 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+0+1
=7

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

The Hershey 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.

The Hershey Co Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0111111001
Question 4 1111011011
Question 5 0000110110
Question 6 0111101001
Question 7 1100111111
Question 8 0111011010
Question 9 1111010001
F-score 5877687467

The Hershey Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0000000111
Question 4 1011111111
Question 5 1111010000
Question 6 0000000011
Question 7 1111111111
Question 8 0000111000
Question 9 0000000011
F-score 5455565577
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