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Mead Johnson Nutrition Co (NYSE:MJN)
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

Mead Johnson Nutrition Co has an F-score of 5 indicating the company's financial situation is typical for a stable company.

MJN' s 10-Year Piotroski F-Score Range
Min: 5   Max: 8
Current: 5

5
8

During the past 12 years, the highest Piotroski F-Score of Mead Johnson Nutrition Co was 8. The lowest was 5. 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 (Dec14) TTM:Last Year (Dec13) TTM:
Net Income was 202.4 + 171.4 + 187.6 + 158.4 = $720 Mil.
Cash Flow from Operations was 197.6 + 106.4 + 260.6 + 228.8 = $793 Mil.
Revenue was 1113.3 + 1111.1 + 1090.7 + 1094.2 = $4,409 Mil.
Gross Profit was 707.6 + 684.3 + 652.8 + 664 = $2,709 Mil.
Average Total Assets from the begining of this year (Dec13)
to the end of this year (Dec14) was
(3474.1 + 3541.2 + 4112.5 + 3691.8 + 3776.5) / 5 = $3719.22 Mil.
Total Assets at the begining of this year (Dec13) was $3,474 Mil.
Long-Term Debt was $1,504 Mil.
Total Current Assets was $2,418 Mil.
Total Current Liabilities was $1,207 Mil.
Net Income was 188 + 172 + 171.3 + 152.5 = $684 Mil.

Revenue was 1037.9 + 1055.3 + 1046.8 + 1060.7 = $4,201 Mil.
Gross Profit was 652.9 + 673.3 + 684.5 + 661.5 = $2,672 Mil.
Average Total Assets from the begining of last year (Dec12)
to the end of last year (Dec13) was
(3258.2 + 3275.5 + 3278.8 + 3355.7 + 3474.1) / 5 = $3328.46 Mil.
Total Assets at the begining of last year (Dec12) was $3,258 Mil.
Long-Term Debt was $1,009 Mil.
Total Current Assets was $2,118 Mil.
Total Current Liabilities was $1,781 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.

Mead Johnson Nutrition Co's current net income (TTM) was 720. ==> 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.

Mead Johnson Nutrition Co's current cash flow from operations (TTM) was 793. ==> 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 (Dec13)
=719.8/3474.1
=0.20719035

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec12)
=683.8/3258.2
=0.20987048

Mead Johnson Nutrition Co's return on assets of this year was 0.20719035. Mead Johnson Nutrition Co's return on assets of last year was 0.20987048. ==> 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.

Mead Johnson Nutrition Co's current net income (TTM) was 720. Mead Johnson Nutrition Co's current cash flow from operations (TTM) was 793. ==> 793 > 720 ==> 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: Dec14)=Long-Term Debt/Average Total Assets from Dec13 to Dec14
=1503.9/3719.22
=0.40435898

Gearing (Last Year: Dec13)=Long-Term Debt/Average Total Assets from Dec12 to Dec13
=1009.1/3328.46
=0.30317324

Mead Johnson Nutrition Co's gearing of this year was 0.40435898. Mead Johnson Nutrition Co's gearing of last year was 0.30317324. ==> Last year is lower than this year ==> Score 0.

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: Dec14)=Total Current Assets/Total Current Liabilities
=2418.1/1206.5
=2.0042271

Current Ratio (Last Year: Dec13)=Total Current Assets/Total Current Liabilities
=2118.1/1781.3
=1.18907539

Mead Johnson Nutrition Co's current ratio of this year was 2.0042271. Mead Johnson Nutrition Co's current ratio of last year was 1.18907539. ==> This year's current ratio is higher. ==> Score 1.

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.

Mead Johnson Nutrition Co's number of shares in issue this year was 203. Mead Johnson Nutrition Co's number of shares in issue last year was 203.1. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

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
=2708.7/4409.3
=0.6143152

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2672.2/4200.7
=0.63613207

Mead Johnson Nutrition Co's gross margin of this year was 0.6143152. Mead Johnson Nutrition Co's gross margin of last year was 0.63613207. ==> Last year's gross margin is higher ==> Score 0.

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 (Dec13)
=4409.3/3474.1
=1.26919202

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec12)
=4200.7/3258.2
=1.28927015

Mead Johnson Nutrition Co's asset turnover of this year was 1.26919202. Mead Johnson Nutrition Co's asset turnover of last year was 1.28927015. ==> 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+0+1+1+0+0
=5

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

Mead Johnson Nutrition Co 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.

Mead Johnson Nutrition Co Annual Data

Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Question 1 11111111
Question 2 11111111
Question 3 00001000
Question 4 11111111
Question 5 11011110
Question 6 10111001
Question 7 01001111
Question 8 00100010
Question 9 11001000
F-score 66558565

Mead Johnson Nutrition Co Quarterly Data

Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14Sep14Dec14
Question 1 1111111111
Question 2 1111111111
Question 3 0010000010
Question 4 1111111111
Question 5 1111111110
Question 6 0001100011
Question 7 0111111111
Question 8 0001111100
Question 9 0000000000
F-score 4567766675
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