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Johnson & Johnson (NYSE:JNJ)
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 = 8 or 9
Bad or low score = 0 or 1

Johnson & Johnson has an F-score of 7 indicating the company's financial situation is typical for a stable company.

JNJ' s 10-Year Piotroski F-Score Range
Min: 4   Max: 8
Current: 7

4
8

During the past 13 years, the highest Piotroski F-Score of Johnson & Johnson was 8. The lowest was 4. 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 own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was 2982 + 3519 + 4727 + 4326 = $15,554 Mil.
Cash Flow from Operations was 5947 + 4139 + 3923 + 5529 = $19,538 Mil.
Revenue was 17575 + 18355 + 18115 + 19495 = $73,540 Mil.
Gross Profit was 12231 + 12400 + 12660 + 13456 = $50,747 Mil.
Average Total Assets from the begining of this year (Jun13)
to the end of this year (Jun14) was
(124325 + 126933 + 132683 + 133330 + 135200) / 5 = $130,494 Mil.
Total Assets was $135,200 Mil.
Long-Term Debt was $13,303 Mil.
Total Current Assets was $60,119 Mil.
Total Current Liabilities was $24,359 Mil.
Net Income was 2968 + 2567 + 3497 + 3833 = $12,865 Mil.

Revenue was 17052 + 17558 + 17505 + 17877 = $69,992 Mil.
Gross Profit was 11455 + 11555 + 11951 + 12388 = $47,349 Mil.
Average Total Assets from the begining of last year (Jun12)
to the end of last year (Jun13) was
(115750 + 118951 + 121347 + 121536 + 124325) / 5 = $120,382 Mil.
Total Assets was $124,325 Mil.
Long-Term Debt was $9,643 Mil.
Total Current Assets was $51,273 Mil.
Total Current Liabilities was $23,767 Mil.

Profitability

Q1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by average total assets throughout the year.

Score 1 if positive, 0 if negative.

Johnson & Johnson's current net income (ttm) was 15,554. ==> Positive ==> Score 1.

Q2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by average total assets throughout the year.

Score 1 if positive, 0 if negative.

Johnson & Johnson's current cash flow from operations (ttm) was 19,538. ==> Positive ==> Score 1.

Q3. 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)/Average Total Assets from Jun13 to Jun14
=15554/130494.2
=0.11919304

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Jun12 to Jun13
=12865/120381.8
=0.10686831

Johnson & Johnson's return on assets of this year was 0.11919304. Johnson & Johnson's return on assets of last year was 0.10686831. ==> This year is higher. ==> Score 1.

Q4. 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.

Johnson & Johnson's current net income (ttm) was 15,554. Johnson & Johnson's current cash flow from operations (ttm) was 19,538. ==> 19,538 > 15,554 ==> CFROA > ROA ==> Score 1.

Funding

Q5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Jun14)=Long-Term Debt/Total Assets
=13303/135200
=0.09839497

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=9643/124325
=0.07756284

Johnson & Johnson's gearing of this year was 0.09839497. Johnson & Johnson's gearing of last year was 0.07756284. ==> Last year is lower than this year ==> Score 0.

Q6. 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: Jun14)=Total Current Assets/Total Current Liabilities
=60119/24359
=2.46804056

Current Ratio (Last Year: Jun13)=Total Current Assets/Total Current Liabilities
=51273/23767
=2.15731897

Johnson & Johnson's current ratio of this year was 2.46804056. Johnson & Johnson's current ratio of last year was 2.15731897. ==> This year's current ratio is higher. ==> Score 1.

Q7. 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.

Johnson & Johnson's number of shares in issue this year was 2874.2. Johnson & Johnson's number of shares in issue last year was 2893. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Q8. 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
=50747/73540
=0.69005983

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=47349/69992
=0.6764916

Johnson & Johnson's gross margin of this year was 0.69005983. Johnson & Johnson's gross margin of last year was 0.6764916. ==> This year's gross margin is higher. ==> Score 1.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by average total assets throughout 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)/Average Total Assets from Jun13 to Jun14
=73540/130494.2
=0.56354995

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Jun12 to Jun13
=69992/120381.8
=0.58141679

Johnson & Johnson's asset turnover of this year was 0.56354995. Johnson & Johnson's asset turnover of last year was 0.58141679. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+1+1+0+1+1+1+0
=7

Good or high score = 8 or 9

Bad or low score = 0 or 1

Johnson & Johnson has an F-score of 7 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, Altman Z-Score, Beneish M-Score


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Johnson & Johnson Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1111111111
Q2 1111111111
Q3 1110100011
Q4 1111111111
Q5 1110010010
Q6 1101111101
Q7 1011111100
Q8 1100100001
Q9 1111100011
F-score 9876865567

Johnson & Johnson Quarterly Data

Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14
Q1 111111111
Q2 111111111
Q3 001011111
Q4 111111111
Q5 111111000
Q6 000011111
Q7 000000001
Q8 000001111
Q9 000011000
F-score 4454786670
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