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Li & Fung Ltd (OTCPK:LFUGF)
Piotroski F-Score
6 (As of Today)

The zones of discrimination were as such:

Good or high score = 8 or 9
Bad or low score = 0 or 1

Li & Fung Ltd has an F-score of 6 indicating the company's financial situation is typical for a stable company.

LFUGF' s 10-Year Piotroski F-Score Range
Min: 3   Max: 8
Current: 6

3
8

During the past 13 years, the highest Piotroski F-Score of Li & Fung Ltd was 8. The lowest was 3. And the median was 5.


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 (Dec13) TTM:Last Year (Dec12) TTM:
Net Income was $755 Mil.
Cash Flow from Operations was $943 Mil.
Revenue was $20,745 Mil.
Gross Profit was $3,214 Mil.
Total Assets at the begining of this year (Dec12) was $12,018 Mil.
Total Assets was $12,465 Mil.
Long-Term Debt was $1,255 Mil.
Total Current Assets was $4,298 Mil.
Total Current Liabilities was $4,082 Mil.
Net Income was $623 Mil.

Revenue was $20,222 Mil.
Gross Profit was $2,868 Mil.
Total Assets at the begining of last year (Dec11) was $10,920 Mil.
Total Assets was $12,018 Mil.
Long-Term Debt was $1,255 Mil.
Total Current Assets was $4,380 Mil.
Total Current Liabilities was $3,874 Mil.

Profitability

Q1. 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.

Li & Fung Ltd's current net income was 755. ==> Positive ==> Score 1.

Q2. 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.

Li & Fung Ltd's current cash flow from operations was 943. ==> 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/Total Assets at the beginning of this year (Dec12)
=755.287/12017.929
=0.06284669

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Dec11)
=622.564/10920.42
=0.05700916

Li & Fung Ltd's return on assets of this year was 0.06284669. Li & Fung Ltd's return on assets of last year was 0.05700916. ==> 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.

Li & Fung Ltd's current net income was 755. Li & Fung Ltd's current cash flow from operations was 943. ==> 943 > 755 ==> CFROA > ROA ==> Score 1.

Funding

Q5. 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)=Long-Term Debt/Total Assets
=1254.915/12465.453
=0.10067143

Gearing (Last Year)=Long-Term Debt/Total Assets
=1255.461/12017.929
=0.10446567

Li & Fung Ltd's gearing of this year was 0.10067143. Li & Fung Ltd's gearing of last year was 0.10446567. ==> This year is lower or equal to last year. ==> Score 1.

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)=Total Current Assets/Total Current Liabilities
=4297.74/4082.124
=1.05281956

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=4379.969/3873.938
=1.13062444

Li & Fung Ltd's current ratio of this year was 1.05281956. Li & Fung Ltd's current ratio of last year was 1.13062444. ==> Last year's current ratio is higher ==> Score 0.

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.

Li & Fung Ltd's number of shares in issue this year was 8356.2. Li & Fung Ltd's number of shares in issue last year was 8287.2. ==> There is larger number of shares in issue this year. ==> Score 0.

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)=Gross Profit/Revenue
=3214.457/20745.41
=0.15494787

Gross Margin (Last Year)=Gross Profit/Revenue
=2868.323/20221.806
=0.14184307

Li & Fung Ltd's gross margin of this year was 0.15494787. Li & Fung Ltd's gross margin of last year was 0.14184307. ==> This year's gross margin is higher. ==> Score 1.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales 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/Total Assets at the beginning of this year (Dec12)
=20745.41/12017.929
=1.72620507

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Dec11)
=20221.806/10920.42
=1.85174252

Li & Fung Ltd's asset turnover of this year was 1.72620507. Li & Fung Ltd's asset turnover of last year was 1.85174252. ==> 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+1+0+0+1+0
=6

Good or high score = 8 or 9

Bad or low score = 0 or 1

Li & Fung Ltd has an F-score of 6 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 own currency.

Li & Fung Ltd Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1111111111
Q2 1111111111
Q3 1100011001
Q4 0101111101
Q5 1110111111
Q6 0010111010
Q7 0000000000
Q8 1110011101
Q9 0100001000
F-score 5753578546
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