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Legg Mason Inc (NYSE:LM)
Piotroski F-Score
5 (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

Legg Mason Inc has an F-score of 5 indicating the company's financial situation is typical for a stable company.

LM' s 10-Year Piotroski F-Score Range
Min: 1   Max: 8
Current: 5

1
8

During the past 13 years, the highest Piotroski F-Score of Legg Mason Inc was 8. The lowest was 1. 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 (Jun15) TTM:Last Year (Jun14) TTM:
Net Income was 4.897 + 77.036 + 82.959 + 94.548 = $259 Mil.
Cash Flow from Operations was 139.445 + 249.426 + 187.071 + 2.67 = $579 Mil.
Revenue was 703.895 + 718.984 + 702.346 + 708.65 = $2,834 Mil.
Gross Profit was 703.895 + 718.984 + 702.346 + 708.65 = $2,834 Mil.
Average Total Assets from the begining of this year (Jun14)
to the end of this year (Jun15) was
(7447.934 + 6755.032 + 7043.23 + 7073.977 + 6829.388) / 5 = $7029.9122 Mil.
Total Assets at the begining of this year (Jun14) was $7,448 Mil.
Long-Term Debt was $1,057 Mil.
Total Current Assets was $1,675 Mil.
Total Current Liabilities was $515 Mil.
Net Income was 86.288 + 81.734 + 68.947 + 72.188 = $309 Mil.

Revenue was 669.852 + 720.092 + 681.396 + 693.881 = $2,765 Mil.
Gross Profit was 669.852 + 720.092 + 681.396 + 693.881 = $2,765 Mil.
Average Total Assets from the begining of last year (Jun13)
to the end of last year (Jun14) was
(6917.154 + 6910.559 + 7005.627 + 7111.349 + 7447.934) / 5 = $7078.5246 Mil.
Total Assets at the begining of last year (Jun13) was $6,917 Mil.
Long-Term Debt was $1,053 Mil.
Total Current Assets was $2,476 Mil.
Total Current Liabilities was $1,135 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.

Legg Mason Inc's current net income (TTM) was 259. ==> 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.

Legg Mason Inc's current cash flow from operations (TTM) was 579. ==> 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 (Jun14)
=259.44/7447.934
=0.03483382

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Jun13)
=309.157/6917.154
=0.04469425

Legg Mason Inc's return on assets of this year was 0.03483382. Legg Mason Inc's return on assets of last year was 0.04469425. ==> 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.

Legg Mason Inc's current net income (TTM) was 259. Legg Mason Inc's current cash flow from operations (TTM) was 579. ==> 579 > 259 ==> 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: Jun15)=Long-Term Debt/Average Total Assets from Jun14 to Jun15
=1057.122/7029.9122
=0.15037485

Gearing (Last Year: Jun14)=Long-Term Debt/Average Total Assets from Jun13 to Jun14
=1053.349/7078.5246
=0.14880912

Legg Mason Inc's gearing of this year was 0.15037485. Legg Mason Inc's gearing of last year was 0.14880912. ==> 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: Jun15)=Total Current Assets/Total Current Liabilities
=1675.48/514.548
=3.25621711

Current Ratio (Last Year: Jun14)=Total Current Assets/Total Current Liabilities
=2475.895/1134.722
=2.18193972

Legg Mason Inc's current ratio of this year was 3.25621711. Legg Mason Inc's current ratio of last year was 2.18193972. ==> 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.

Legg Mason Inc's number of shares in issue this year was 110.2. Legg Mason Inc's number of shares in issue last year was 115.2. ==> 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
=2833.875/2833.875
=1

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2765.221/2765.221
=1

Legg Mason Inc's gross margin of this year was 1. Legg Mason Inc'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 (Jun14)
=2833.875/7447.934
=0.38049142

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Jun13)
=2765.221/6917.154
=0.39976282

Legg Mason Inc's asset turnover of this year was 0.38049142. Legg Mason Inc's asset turnover of last year was 0.39976282. ==> 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+1+1+0+0
=5

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

Legg Mason Inc has an F-score of 5 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.

Legg Mason Inc Annual Data

Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14Mar15
Question 1 1110111011
Question 2 1111111111
Question 3 1000110010
Question 4 0111111111
Question 5 0100101010
Question 6 1101110100
Question 7 0011011111
Question 8 0001000000
Question 9 1110110011
F-score 5655775475

Legg Mason Inc Quarterly Data

Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15
Question 1 0001111111
Question 2 1111111111
Question 3 0001111000
Question 4 1111111111
Question 5 0111111100
Question 6 1000001001
Question 7 1111111111
Question 8 0000000000
Question 9 0111111110
F-score 4557778655
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