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Mercer International Inc (NAS:MERC)
Piotroski F-Score
5 (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

Mercer International Inc has an F-score of 5 indicating the company's financial situation is typical for a stable company.

MERC' s Piotroski F-Score Range Over the Past 10 Years
Min: 1   Max: 9
Current: 5

1
9

During the past 13 years, the highest Piotroski F-Score of Mercer International Inc was 9. The lowest was 1. And the median was 5.


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 3.205 + 13.634 + 16.412 + 23.76 = $57 Mil.
Cash Flow from Operations was 26.771 + 59.845 + 10.434 + 71.69 = $169 Mil.
Revenue was 282.625 + 257.547 + 266.936 + 270.893 = $1,078 Mil.
Gross Profit was 65.622 + 55.295 + 45.25 + 56.497 = $223 Mil.
Average Total Assets from the begining of this year (Sep14)
to the end of this year (Sep15) was
(1547.916 + 1326.807 + 1233.652 + 1267.848 + 1272.417) / 5 = $1329.728 Mil.
Total Assets at the begining of this year (Sep14) was $1,548 Mil.
Long-Term Debt was $683 Mil.
Total Current Assets was $453 Mil.
Total Current Liabilities was $136 Mil.
Net Income was -9.833 + 21.041 + 0.571 + 88.337 = $100 Mil.

Revenue was 282.682 + 305.685 + 285.192 + 301.61 = $1,175 Mil.
Gross Profit was 24.159 + 49.679 + 34.959 + 59.465 = $168 Mil.
Average Total Assets from the begining of last year (Sep13)
to the end of last year (Sep14) was
(1587.548 + 1548.559 + 1546.673 + 1608.828 + 1547.916) / 5 = $1567.9048 Mil.
Total Assets at the begining of last year (Sep13) was $1,588 Mil.
Long-Term Debt was $836 Mil.
Total Current Assets was $554 Mil.
Total Current Liabilities was $145 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.

Mercer International Inc's current net income (TTM) was 57. ==> 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.

Mercer International Inc's current cash flow from operations (TTM) was 169. ==> 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.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Sep14)
=57.011/1547.916
=0.03683081

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=100.116/1587.548
=0.06306329

Mercer International Inc's return on assets of this year was 0.03683081. Mercer International Inc's return on assets of last year was 0.06306329. ==> 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.

Mercer International Inc's current net income (TTM) was 57. Mercer International Inc's current cash flow from operations (TTM) was 169. ==> 169 > 57 ==> 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
=683.439/1329.728
=0.51396902

Gearing (Last Year: Sep14)=Long-Term Debt/Average Total Assets from Sep13 to Sep14
=836.315/1567.9048
=0.53339654

Mercer International Inc's gearing of this year was 0.51396902. Mercer International Inc's gearing of last year was 0.53339654. ==> 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
=453.07/136.114
=3.3286069

Current Ratio (Last Year: Sep14)=Total Current Assets/Total Current Liabilities
=554.13/144.721
=3.82895364

Mercer International Inc's current ratio of this year was 3.3286069. Mercer International Inc's current ratio of last year was 3.82895364. ==> 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.

Mercer International Inc's number of shares in issue this year was 64.8. Mercer International Inc's number of shares in issue last year was 64.6. ==> 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
=222.664/1078.001
=0.20655268

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=168.262/1175.169
=0.14318111

Mercer International Inc's gross margin of this year was 0.20655268. Mercer International Inc's gross margin of last year was 0.14318111. ==> 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)
=1078.001/1547.916
=0.69642087

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=1175.169/1587.548
=0.74024155

Mercer International Inc's asset turnover of this year was 0.69642087. Mercer International Inc's asset turnover of last year was 0.74024155. ==> Last year's asset turnover is higher ==> Score 0.

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+0
=5

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

Mercer International Inc has an F-score of 5 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.

Mercer International Inc Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Question 1 0110011001
Question 2 1110111111
Question 3 0100110001
Question 4 1001111111
Question 5 1011011001
Question 6 1111011011
Question 7 0001000100
Question 8 1100110001
Question 9 1110010011
F-score 6654485348

Mercer International Inc Quarterly Data

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
Question 1 0000111111
Question 2 1111111111
Question 3 0001111110
Question 4 1111101111
Question 5 0000111111
Question 6 0111111110
Question 7 1000000000
Question 8 0001111111
Question 9 1111111000
F-score 4446878775
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