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Level 3 Communications Inc (NYSE:LVLT)
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

Level 3 Communications Inc has an F-score of 7 indicating the company's financial situation is typical for a stable company.

LVLT' s 10-Year Piotroski F-Score Range
Min: 2   Max: 7
Current: 7

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 (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was 51 + 112 + 14 + -21 = $156 Mil.
Cash Flow from Operations was 303 + 141 + 386 + 104 = $934 Mil.
Revenue was 1625 + 1609 + 1602 + 1569 = $6,405 Mil.
Gross Profit was 1012 + 995 + 984 + 961 = $3,952 Mil.
Total Assets at the begining of this year (Jun13) was $12,865 Mil.
Total Assets was $13,028 Mil.
Long-Term Debt was $7,855 Mil.
Total Current Assets was $1,539 Mil.
Total Current Liabilities was $1,824 Mil.
Net Income was -24 + -78 + -56 + -166 = $-324 Mil.

Revenue was 1565 + 1577 + 1614 + 1590 = $6,346 Mil.
Gross Profit was 949 + 948 + 959 + 948 = $3,804 Mil.
Total Assets at the begining of last year (Jun12) was $12,947 Mil.
Total Assets was $12,865 Mil.
Long-Term Debt was $8,506 Mil.
Total Current Assets was $1,503 Mil.
Total Current Liabilities was $1,503 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.

Level 3 Communications Inc's current net income was 156. ==> 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.

Level 3 Communications Inc's current cash flow from operations was 934. ==> 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 (Jun13)
=156/12865
=0.01212592

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Jun12)
=-324/12947
=-0.0250251

Level 3 Communications Inc's return on assets of this year was 0.01212592. Level 3 Communications Inc's return on assets of last year was -0.0250251. ==> 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.

Level 3 Communications Inc's current net income was 156. Level 3 Communications Inc's current cash flow from operations was 934. ==> 934 > 156 ==> 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 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year)=Long-Term Debt/Total Assets
=7855/13028
=0.60293215

Gearing (Last Year)=Long-Term Debt/Total Assets
=8506/12865
=0.66117373

Level 3 Communications Inc's gearing of this year was 0.60293215. Level 3 Communications Inc's gearing of last year was 0.66117373. ==> 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)=Total Current Assets/Total Current Liabilities
=1539/1824
=0.84375

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=1503/1503
=1

Level 3 Communications Inc's current ratio of this year was 0.84375. Level 3 Communications Inc's current ratio of last year was 1. ==> 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.

Level 3 Communications Inc's number of shares in issue this year was 241.4. Level 3 Communications Inc's number of shares in issue last year was 221.6. ==> There is larger number of shares in issue this year. ==> Score 0.

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
=3952/6405
=0.61701795

Gross Margin (Last Year)=Gross Profit/Revenue
=3804/6346
=0.59943271

Level 3 Communications Inc's gross margin of this year was 0.61701795. Level 3 Communications Inc's gross margin of last year was 0.59943271. ==> 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 (Jun13)
=6405/12865
=0.49786242

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Jun12)
=6346/12947
=0.49015216

Level 3 Communications Inc's asset turnover of this year was 0.49786242. Level 3 Communications Inc's asset turnover of last year was 0.49015216. ==> 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+0+1+1
=7

Good or high score = 8 or 9

Bad or low score = 0 or 1

Level 3 Communications 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.

Level 3 Communications Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 0000000000
Q2 0011111111
Q3 1000100011
Q4 1111111111
Q5 0001110100
Q6 0110001100
Q7 0000000000
Q8 0011111101
Q9 0101001100
F-score 2345545634

Level 3 Communications Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 0000000011
Q2 1111111111
Q3 0111111111
Q4 1111111111
Q5 1110000011
Q6 0000110000
Q7 0000000000
Q8 1000011111
Q9 1110000011
F-score 5553454477
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