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Level 3 Communications Inc (NYSE:LVLT)
Piotroski F-Score
4 (As of Today)

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 4 indicating the company's financial situation is typical for a stable company.

LVLT' s 10-Year Piotroski F-Score Range
Min: 2   Max: 6
Current: 4

2
6

During the past 13 years, the highest Piotroski F-Score of Level 3 Communications Inc was 6. 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 (Dec13) TTM:Last Year (Dec12) TTM:
Net Income was 14 + -21 + -24 + -78 = $-109 Mil.
Cash Flow from Operations was 386 + 104 + 216 + 7 = $713 Mil.
Revenue was 1602 + 1569 + 1565 + 1577 = $6,313 Mil.
Gross Profit was 984 + 961 + 949 + 948 = $3,842 Mil.
Total Assets at the begining of this year (Dec12) was $13,307 Mil.
Total Assets was $12,874 Mil.
Long-Term Debt was $8,331 Mil.
Total Current Assets was $1,454 Mil.
Total Current Liabilities was $1,446 Mil.
Net Income was -56 + -166 + -62 + -138 = $-422 Mil.

Revenue was 1614 + 1590 + 1586 + 1586 = $6,376 Mil.
Gross Profit was 959 + 948 + 938 + 929 = $3,774 Mil.
Total Assets at the begining of last year (Dec11) was $13,188 Mil.
Total Assets was $13,307 Mil.
Long-Term Debt was $8,516 Mil.
Total Current Assets was $1,842 Mil.
Total Current Liabilities was $1,802 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 -109. ==> Negative ==> Score 0.

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 713. ==> 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 (Dec12)
=-109/13307
=-0.00819118

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Dec11)
=-422/13188
=-0.03199879

Level 3 Communications Inc's return on assets of this year was -0.00819118. Level 3 Communications Inc's return on assets of last year was -0.03199879. ==> 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 -109. Level 3 Communications Inc's current cash flow from operations was 713. ==> 713 > -109 ==> 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
=8331/12874
=0.64711822

Gearing (Last Year)=Long-Term Debt/Total Assets
=8516/13307
=0.63996393

Level 3 Communications Inc's gearing of this year was 0.64711822. Level 3 Communications Inc's gearing of last year was 0.63996393. ==> 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
=1454/1446
=1.0055325

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=1842/1802
=1.02219756

Level 3 Communications Inc's current ratio of this year was 1.0055325. Level 3 Communications Inc's current ratio of last year was 1.02219756. ==> 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.

Level 3 Communications Inc's number of shares in issue this year was 225.9. Level 3 Communications Inc's number of shares in issue last year was 217.9. ==> There is more 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
=3842/6313
=0.60858546

Gross Margin (Last Year)=Gross Profit/Revenue
=3774/6376
=0.59190715

Level 3 Communications Inc's gross margin of this year was 0.60858546. Level 3 Communications Inc's gross margin of last year was 0.59190715. ==> 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 (Dec12)
=6313/13307
=0.47441196

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Dec11)
=6376/13188
=0.48346982

Level 3 Communications Inc's asset turnover of this year was 0.47441196. Level 3 Communications Inc's asset turnover of last year was 0.48346982. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=0+1+1+1+0+0+0+1+0
=4

Good or high score = 8 or 9

Bad or low score = 0 or 1

Level 3 Communications Inc has an F-score of 4 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 1001111101
Q9 0111001100
F-score 3345545634

Level 3 Communications Inc Quarterly Data

Sep11Dec11Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13
Q1 0000000000
Q2 1111111111
Q3 1001111111
Q4 1111111111
Q5 0111100000
Q6 1100001100
Q7 0000000000
Q8 1100000111
Q9 1111100000
F-score 6645534544
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