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Legg Mason Inc (NYSE:LM)
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

Legg Mason Inc has an F-score of 7 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: 7

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 (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was 86.288 + 81.734 + 68.947 + 72.188 = $309 Mil.
Cash Flow from Operations was 178.02 + 215.137 + 121.97 + -7.824 = $507 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 this year (Jun13)
to the end of this year (Jun14) was
(6917.154 + 6910.559 + 7005.627 + 7111.349 + 7447.934) / 5 = $7,079 Mil.
Total Assets was $7,448 Mil.
Long-Term Debt was $1,053 Mil.
Total Current Assets was $2,476 Mil.
Total Current Liabilities was $1,135 Mil.
Net Income was 80.797 + -453.87 + 29.204 + 47.815 = $-296 Mil.

Revenue was 640.295 + 673.9 + 667.763 + 670.417 = $2,652 Mil.
Gross Profit was 640.295 + 673.9 + 667.763 + 670.417 = $2,652 Mil.
Average Total Assets from the begining of last year (Jun12)
to the end of last year (Jun13) was
(7799.007 + 7874.899 + 7115.06 + 7269.66 + 6917.154) / 5 = $7,395 Mil.
Total Assets was $6,917 Mil.
Long-Term Debt was $1,198 Mil.
Total Current Assets was $1,671 Mil.
Total Current Liabilities was $550 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.

Legg Mason Inc's current net income (ttm) was 309. ==> 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.

Legg Mason Inc's current cash flow from operations (ttm) was 507. ==> 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
=309.157/7078.5246
=0.04367534

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Jun12 to Jun13
=-296.054/7395.156
=-0.0400335

Legg Mason Inc's return on assets of this year was 0.04367534. Legg Mason Inc's return on assets of last year was -0.0400335. ==> 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.

Legg Mason Inc's current net income (ttm) was 309. Legg Mason Inc's current cash flow from operations (ttm) was 507. ==> 507 > 309 ==> 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
=1053.349/7447.934
=0.14142835

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=1198.433/6917.154
=0.17325521

Legg Mason Inc's gearing of this year was 0.14142835. Legg Mason Inc's gearing of last year was 0.17325521. ==> 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: Jun14)=Total Current Assets/Total Current Liabilities
=2475.895/1134.722
=2.18193972

Current Ratio (Last Year: Jun13)=Total Current Assets/Total Current Liabilities
=1670.786/549.597
=3.04002023

Legg Mason Inc's current ratio of this year was 2.18193972. Legg Mason Inc's current ratio of last year was 3.04002023. ==> 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.

Legg Mason Inc's number of shares in issue this year was 118.2. Legg Mason Inc's number of shares in issue last year was 125.4. ==> 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
=2765.221/2765.221
=1

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2652.375/2652.375
=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.

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
=2765.221/7078.5246
=0.39064935

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Jun12 to Jun13
=2652.375/7395.156
=0.35866383

Legg Mason Inc's asset turnover of this year was 0.39064935. Legg Mason Inc's asset turnover of last year was 0.35866383. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

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

Good or high score = 8 or 9

Bad or low score = 0 or 1

Legg Mason Inc 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.

Legg Mason Inc Annual Data

Mar05Mar06Mar07Mar08Mar09Mar10Mar11Mar12Mar13Mar14
Q1 1111011101
Q2 1111111111
Q3 1100011001
Q4 0011111111
Q5 1010010101
Q6 1110111010
Q7 0001100111
Q8 0001000000
Q9 1110001000
F-score 6565466546

Legg Mason Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 1110000111
Q2 1111111111
Q3 0000000111
Q4 1111111111
Q5 1000011111
Q6 0111100000
Q7 1111111111
Q8 0000000000
Q9 0001111111
F-score 5555555777
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