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Lowe's Companies Inc. (NYSE:LOW)
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

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

LOW' s 10-Year Piotroski F-Score Range
Min: 4   Max: 9
Current: 7

4
9

During the past 13 years, the highest Piotroski F-Score of Lowe's Companies Inc. was 9. 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 (Jan14) TTM:Last Year (Jan13) TTM:
Net Income was 306 + 499 + 941 + 540 = $2,286 Mil.
Cash Flow from Operations was 252 + 503 + 1364 + 1992 = $4,111 Mil.
Revenue was 11660 + 12957 + 15711 + 13088 = $53,416 Mil.
Gross Profit was 4042 + 4481 + 5397 + 4555 = $18,475 Mil.
Total Assets at the begining of this year (Jan13) was $32,666 Mil.
Total Assets was $32,732 Mil.
Long-Term Debt was $10,086 Mil.
Total Current Assets was $10,296 Mil.
Total Current Liabilities was $8,876 Mil.
Net Income was 289 + 396 + 747 + 527 = $1,959 Mil.

Revenue was 11046 + 12073 + 14249 + 13153 = $50,521 Mil.
Gross Profit was 3785 + 4143 + 4834 + 4564 = $17,326 Mil.
Total Assets at the begining of last year (Jan12) was $33,559 Mil.
Total Assets was $32,666 Mil.
Long-Term Debt was $9,030 Mil.
Total Current Assets was $9,784 Mil.
Total Current Liabilities was $7,708 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.

Lowe's Companies Inc.'s current net income was 2,286. ==> 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.

Lowe's Companies Inc.'s current cash flow from operations was 4,111. ==> 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 (Jan13)
=2286/32666
=0.06998102

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Jan12)
=1959/33559
=0.0583748

Lowe's Companies Inc.'s return on assets of this year was 0.06998102. Lowe's Companies Inc.'s return on assets of last year was 0.0583748. ==> 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.

Lowe's Companies Inc.'s current net income was 2,286. Lowe's Companies Inc.'s current cash flow from operations was 4,111. ==> 4,111 > 2,286 ==> 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 1 if gearing is lower, 0 if it’s higher.

Gearing (This Year)=Long-Term Debt/Total Assets
=10086/32732
=0.30813882

Gearing (Last Year)=Long-Term Debt/Total Assets
=9030/32666
=0.27643421

Lowe's Companies Inc.'s gearing of this year was 0.30813882. Lowe's Companies Inc.'s gearing of last year was 0.27643421. ==> Last year is lower ==> 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)=Total Current Assets/Total Current Liabilities
=10296/8876
=1.15998197

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=9784/7708
=1.26933057

Lowe's Companies Inc.'s current ratio of this year was 1.15998197. Lowe's Companies Inc.'s current ratio of last year was 1.26933057. ==> 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 1 if there is fewer number of shares in issue this year. Score 0 otherwise.

Lowe's Companies Inc.'s number of shares in issue this year was 1037. Lowe's Companies Inc.'s number of shares in issue last year was 1113. ==> There is the same number of shares in issue this year, or fewer. ==> 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)=Gross Profit/Revenue
=18475/53416
=0.34587015

Gross Margin (Last Year)=Gross Profit/Revenue
=17326/50521
=0.3429465

Lowe's Companies Inc.'s gross margin of this year was 0.34587015. Lowe's Companies Inc.'s gross margin of last year was 0.3429465. ==> 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 (Jan13)
=53416/32666
=1.63521705

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Jan12)
=50521/33559
=1.50543818

Lowe's Companies Inc.'s asset turnover of this year was 1.63521705. Lowe's Companies Inc.'s asset turnover of last year was 1.50543818. ==> 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+0+0+1+1+1
=7

Good or high score = 8 or 9

Bad or low score = 0 or 1

Lowe's Companies 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


Historical Data

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

Lowe's Companies Inc. Annual Data

Jan05Jan06Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14
Q1 1111111111
Q2 1111111111
Q3 1100001011
Q4 1111111111
Q5 1100110000
Q6 0100111000
Q7 1011111111
Q8 1111011001
Q9 1100001111
F-score 8855678567

Lowe's Companies Inc. Quarterly Data

Oct11Jan12Apr12Jul12Oct12Jan13Apr13Jul13Oct13Jan14
Q1 1111111111
Q2 1111111111
Q3 0010110111
Q4 1111111111
Q5 0000000000
Q6 0011100000
Q7 1111111111
Q8 0000000111
Q9 1111110011
F-score 5576764677
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