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Level 3 Communications Inc (NYSE:LVLT)
Piotroski F-Score
6 (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

Level 3 Communications Inc has an F-score of 6 indicating the company's financial situation is typical for a stable company.

LVLT' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 7
Current: 6

2
7

During the past 13 years, the highest Piotroski F-Score of Level 3 Communications Inc was 7. The lowest was 2. And the median was 4.


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 (Sep15) TTM:Last Year (Sep14) TTM:
Net Income was 66 + 122 + -13 + 1 = $176 Mil.
Cash Flow from Operations was 396 + 305 + 419 + 575 = $1,695 Mil.
Revenue was 1914 + 2053 + 2061 + 2062 = $8,090 Mil.
Gross Profit was 874 + 974 + 1002 + 987 = $3,837 Mil.
Average Total Assets from the begining of this year (Sep14)
to the end of this year (Sep15) was
(13983 + 20947 + 21303 + 20884 + 20883) / 5 = $19600 Mil.
Total Assets at the begining of this year (Sep14) was $13,983 Mil.
Long-Term Debt was $10,997 Mil.
Total Current Assets was $1,663 Mil.
Total Current Liabilities was $1,470 Mil.
Net Income was 14 + 112 + 51 + 85 = $262 Mil.

Revenue was 1602 + 1609 + 1625 + 1629 = $6,465 Mil.
Gross Profit was 686 + 703 + 710 + 715 = $2,814 Mil.
Average Total Assets from the begining of last year (Sep13)
to the end of last year (Sep14) was
(12852 + 12874 + 12889 + 13028 + 13983) / 5 = $13125.2 Mil.
Total Assets at the begining of last year (Sep13) was $12,852 Mil.
Long-Term Debt was $8,856 Mil.
Total Current Assets was $2,600 Mil.
Total Current Liabilities was $1,853 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.

Level 3 Communications Inc's current net income (TTM) was 176. ==> 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.

Level 3 Communications Inc's current cash flow from operations (TTM) was 1,695. ==> 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.

Level 3 Communications Inc's return on assets of this year was 0.01258671. Level 3 Communications Inc's return on assets of last year was 0.02038593. ==> 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.

Level 3 Communications Inc's current net income (TTM) was 176. Level 3 Communications Inc's current cash flow from operations (TTM) was 1,695. ==> 1,695 > 176 ==> 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: Sep15)=Long-Term Debt/Average Total Assets from Sep14 to Sep15
=10997/19600
=0.56107143

Gearing (Last Year: Sep14)=Long-Term Debt/Average Total Assets from Sep13 to Sep14
=8856/13125.2
=0.67473258

Level 3 Communications Inc's gearing of this year was 0.56107143. Level 3 Communications Inc's gearing of last year was 0.67473258. ==> This year is lower or equal to last year. ==> Score 1.

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: Sep15)=Total Current Assets/Total Current Liabilities
=1663/1470
=1.13129252

Current Ratio (Last Year: Sep14)=Total Current Assets/Total Current Liabilities
=2600/1853
=1.40313006

Level 3 Communications Inc's current ratio of this year was 1.13129252. Level 3 Communications Inc's current ratio of last year was 1.40313006. ==> Last year's current ratio is higher ==> Score 0.

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.

Level 3 Communications Inc's number of shares in issue this year was 358.7. Level 3 Communications Inc's number of shares in issue last year was 242.5. ==> There is larger number of shares in issue this year. ==> Score 0.

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
=3837/8090
=0.47428925

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2814/6465
=0.43526682

Level 3 Communications Inc's gross margin of this year was 0.47428925. Level 3 Communications Inc's gross margin of last year was 0.43526682. ==> This year's gross margin is higher. ==> Score 1.

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 (Sep14)
=8090/13983
=0.57855968

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=6465/12852
=0.50303455

Level 3 Communications Inc's asset turnover of this year was 0.57855968. Level 3 Communications Inc's asset turnover of last year was 0.50303455. ==> This year's asset turnover is higher. ==> Score 1.

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+1+0+0+1+1
=6

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

Level 3 Communications Inc has an F-score of 6 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.

Level 3 Communications Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Question 1 0000000001
Question 2 0111111111
Question 3 0001000111
Question 4 1111111111
Question 5 0011100110
Question 6 1100011000
Question 7 0000000000
Question 8 0011111000
Question 9 1100011001
F-score 3445455445

Level 3 Communications Inc Quarterly Data

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
Question 1 0001111111
Question 2 1111111111
Question 3 1111111110
Question 4 1111111111
Question 5 1111100001
Question 6 1000010110
Question 7 0000000000
Question 8 1000000011
Question 9 0001111111
F-score 6446665676
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