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Southwest Airlines Co (NYSE:LUV)
Piotroski F-Score
8 (As of Today)

Good Sign:

Piotroski F-Score of 8 is 8, 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

Southwest Airlines Co has an F-score of 8. It is a good or high score, which usually indicates a very healthy situation.

LUV' s 10-Year Piotroski F-Score Range
Min: 2   Max: 8
Current: 8

2
8

During the past 13 years, the highest Piotroski F-Score of Southwest Airlines Co was 8. The lowest was 2. 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 (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was 259 + 212 + 152 + 465 = $1,088 Mil.
Cash Flow from Operations was 428 + 289 + 1119 + 2886 = $4,722 Mil.
Revenue was 4545 + 4428 + 4166 + 5011 = $18,150 Mil.
Gross Profit was 2442 + 2484 + 2255 + 2980 = $10,161 Mil.
Average Total Assets from the begining of this year (Jun13)
to the end of this year (Jun14) was
(19382 + 19364 + 19345 + 19976 + 20891) / 5 = $19,792 Mil.
Total Assets was $20,891 Mil.
Long-Term Debt was $2,395 Mil.
Total Current Assets was $5,317 Mil.
Total Current Liabilities was $7,027 Mil.
Net Income was 16 + 78 + 59 + 224 = $377 Mil.

Revenue was 4309 + 4173 + 4084 + 4643 = $17,209 Mil.
Gross Profit was 2111 + 2061 + 1977 + 2489 = $8,638 Mil.
Average Total Assets from the begining of last year (Jun12)
to the end of last year (Jun13) was
(18516 + 18813 + 18596 + 19197 + 19382) / 5 = $18,901 Mil.
Total Assets was $19,382 Mil.
Long-Term Debt was $2,671 Mil.
Total Current Assets was $4,864 Mil.
Total Current Liabilities was $5,779 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.

Southwest Airlines Co's current net income (ttm) was 1,088. ==> 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.

Southwest Airlines Co's current cash flow from operations (ttm) was 4,722. ==> 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
=1088/19791.6
=0.05497282

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Jun12 to Jun13
=377/18900.8
=0.01994625

Southwest Airlines Co's return on assets of this year was 0.05497282. Southwest Airlines Co's return on assets of last year was 0.01994625. ==> 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.

Southwest Airlines Co's current net income (ttm) was 1,088. Southwest Airlines Co's current cash flow from operations (ttm) was 4,722. ==> 4,722 > 1,088 ==> 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
=2395/20891
=0.11464267

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=2671/19382
=0.13780828

Southwest Airlines Co's gearing of this year was 0.11464267. Southwest Airlines Co's gearing of last year was 0.13780828. ==> 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
=5317/7027
=0.75665291

Current Ratio (Last Year: Jun13)=Total Current Assets/Total Current Liabilities
=4864/5779
=0.84166811

Southwest Airlines Co's current ratio of this year was 0.75665291. Southwest Airlines Co's current ratio of last year was 0.84166811. ==> 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.

Southwest Airlines Co's number of shares in issue this year was 698. Southwest Airlines Co's number of shares in issue last year was 722. ==> 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
=10161/18150
=0.55983471

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=8638/17209
=0.50194666

Southwest Airlines Co's gross margin of this year was 0.55983471. Southwest Airlines Co's gross margin of last year was 0.50194666. ==> This year's gross margin is higher. ==> Score 1.

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
=18150/19791.6
=0.91705572

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Jun12 to Jun13
=17209/18900.8
=0.91049056

Southwest Airlines Co's asset turnover of this year was 0.91705572. Southwest Airlines Co's asset turnover of last year was 0.91049056. ==> 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+1+1
=8

Good or high score = 8 or 9

Bad or low score = 0 or 1

Southwest Airlines Co has an F-score of 8. It is a good or high score, which usually indicates a very healthy situation.


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.

Southwest Airlines Co Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1111111111
Q2 1111011111
Q3 0101001011
Q4 1111011111
Q5 0100011011
Q6 0001111000
Q7 0101100011
Q8 1001001001
Q9 1111101110
F-score 5748458477

Southwest Airlines Co Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 1111111111
Q2 1111111111
Q3 0011111111
Q4 1111111111
Q5 0111111111
Q6 0010000000
Q7 0111111111
Q8 0001001111
Q9 1111000101
F-score 4688667878
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