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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 Piotroski F-Score Range Over the Past 10 Years
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 (Dec15) TTM:Last Year (Dec14) TTM:
Net Income was 82.959 + 94.548 + 64.319 + -138.626 = $103 Mil.
Cash Flow from Operations was 187.071 + 2.67 + 149.038 + 154.684 = $493 Mil.
Revenue was 702.346 + 708.65 + 673.086 + 659.557 = $2,744 Mil.
Gross Profit was 702.346 + 708.65 + 673.086 + 659.557 = $2,744 Mil.
Average Total Assets from the begining of this year (Dec14)
to the end of this year (Dec15) was
(7043.23 + 7073.977 + 6829.388 + 6877.954 + 6838.473) / 5 = $6932.6044 Mil.
Total Assets at the begining of this year (Dec14) was $7,043 Mil.
Long-Term Debt was $1,057 Mil.
Total Current Assets was $1,761 Mil.
Total Current Liabilities was $689 Mil.
Net Income was 68.947 + 72.188 + 4.897 + 77.036 = $223 Mil.

Revenue was 681.396 + 693.881 + 703.895 + 718.984 = $2,798 Mil.
Gross Profit was 681.396 + 693.881 + 703.895 + 718.984 = $2,798 Mil.
Average Total Assets from the begining of last year (Dec13)
to the end of last year (Dec14) was
(7005.627 + 7111.349 + 7447.934 + 6755.032 + 7043.23) / 5 = $7072.6344 Mil.
Total Assets at the begining of last year (Dec13) was $7,006 Mil.
Long-Term Debt was $1,056 Mil.
Total Current Assets was $1,813 Mil.
Total Current Liabilities was $711 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 103. ==> 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 493. ==> 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 (Dec14)
=103.2/7043.23
=0.01465237

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec13)
=223.068/7005.627
=0.03184126

Legg Mason Inc's return on assets of this year was 0.01465237. Legg Mason Inc's return on assets of last year was 0.03184126. ==> 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 103. Legg Mason Inc's current cash flow from operations (TTM) was 493. ==> 493 > 103 ==> 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: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=1056.759/6932.6044
=0.15243319

Gearing (Last Year: Dec14)=Long-Term Debt/Average Total Assets from Dec13 to Dec14
=1056.215/7072.6344
=0.14933827

Legg Mason Inc's gearing of this year was 0.15243319. Legg Mason Inc's gearing of last year was 0.14933827. ==> 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: Dec15)=Total Current Assets/Total Current Liabilities
=1760.821/688.571
=2.55721051

Current Ratio (Last Year: Dec14)=Total Current Assets/Total Current Liabilities
=1813.374/711.121
=2.55002173

Legg Mason Inc's current ratio of this year was 2.55721051. Legg Mason Inc's current ratio of last year was 2.55002173. ==> 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 106.4. Legg Mason Inc's number of shares in issue last year was 112.6. ==> 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
=2743.639/2743.639
=1

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2798.156/2798.156
=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 (Dec14)
=2743.639/7043.23
=0.38954272

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec13)
=2798.156/7005.627
=0.3994155

Legg Mason Inc's asset turnover of this year was 0.38954272. Legg Mason Inc's asset turnover of last year was 0.3994155. ==> 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 0011001111
Question 8 0000000000
Question 9 1110110011
F-score 5654765475

Legg Mason Inc Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
Question 1 0111111111
Question 2 1111111111
Question 3 0111100010
Question 4 1111111111
Question 5 1111110000
Question 6 0000100101
Question 7 1111111111
Question 8 0000000000
Question 9 1111111010
F-score 5777865565
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