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Mead Johnson Nutrition Co (NYSE:MJN)
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

Mead Johnson Nutrition Co has an F-score of 6 indicating the company's financial situation is typical for a stable company.

MJN' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 8
Current: 6

4
8

During the past 13 years, the highest Piotroski F-Score of Mead Johnson Nutrition Co was 8. The lowest was 4. 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 158.4 + 207.4 + 162.9 + 155.2 = $684 Mil.
Cash Flow from Operations was 228.8 + 274.5 + 182 + 152.4 = $838 Mil.
Revenue was 1094.2 + 1094.4 + 1032.4 + 977.5 = $4,199 Mil.
Gross Profit was 664 + 700.9 + 676 + 630.7 = $2,672 Mil.
Average Total Assets from the begining of this year (Sep14)
to the end of this year (Sep15) was
(3691.8 + 3776.5 + 3884.7 + 3959.1 + 3777.9) / 5 = $3818 Mil.
Total Assets at the begining of this year (Sep14) was $3,692 Mil.
Long-Term Debt was $1,839 Mil.
Total Current Assets was $2,435 Mil.
Total Current Liabilities was $1,194 Mil.
Net Income was 152.5 + 202.4 + 171.4 + 187.6 = $714 Mil.

Revenue was 1060.7 + 1113.3 + 1111.1 + 1090.7 = $4,376 Mil.
Gross Profit was 661.5 + 707.6 + 684.3 + 652.8 = $2,706 Mil.
Average Total Assets from the begining of last year (Sep13)
to the end of last year (Sep14) was
(3355.7 + 3474.1 + 3541.2 + 4112.5 + 3691.8) / 5 = $3635.06 Mil.
Total Assets at the begining of last year (Sep13) was $3,356 Mil.
Long-Term Debt was $1,497 Mil.
Total Current Assets was $2,337 Mil.
Total Current Liabilities was $1,237 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 684. ==> 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 838. ==> 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)
=683.9/3691.8
=0.18524839

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=713.9/3355.7
=0.2127425

Mead Johnson Nutrition Co's return on assets of this year was 0.18524839. Mead Johnson Nutrition Co's return on assets of last year was 0.2127425. ==> 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 684. Mead Johnson Nutrition Co's current cash flow from operations (TTM) was 838. ==> 838 > 684 ==> 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
=1839.3/3818
=0.48174437

Gearing (Last Year: Sep14)=Long-Term Debt/Average Total Assets from Sep13 to Sep14
=1496.8/3635.06
=0.41176762

Mead Johnson Nutrition Co's gearing of this year was 0.48174437. Mead Johnson Nutrition Co's gearing of last year was 0.41176762. ==> 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: Sep15)=Total Current Assets/Total Current Liabilities
=2435.2/1193.6
=2.04021448

Current Ratio (Last Year: Sep14)=Total Current Assets/Total Current Liabilities
=2336.8/1237.1
=1.8889338

Mead Johnson Nutrition Co's current ratio of this year was 2.04021448. Mead Johnson Nutrition Co's current ratio of last year was 1.8889338. ==> 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 201.7. Mead Johnson Nutrition Co's number of shares in issue last year was 202.7. ==> 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
=2671.6/4198.5
=0.6363225

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2706.2/4375.8
=0.61844691

Mead Johnson Nutrition Co's gross margin of this year was 0.6363225. Mead Johnson Nutrition Co's gross margin of last year was 0.61844691. ==> 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)
=4198.5/3691.8
=1.13725012

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=4375.8/3355.7
=1.30399023

Mead Johnson Nutrition Co's asset turnover of this year was 1.13725012. Mead Johnson Nutrition Co's asset turnover of last year was 1.30399023. ==> 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+1+0
=6

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

Mead Johnson Nutrition Co 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.

Mead Johnson Nutrition Co Annual Data

Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Question 1 1111111
Question 2 1111111
Question 3 0010100
Question 4 1111111
Question 5 0111100
Question 6 1110011
Question 7 0001111
Question 8 1000101
Question 9 0010000
F-score 5575756

Mead Johnson Nutrition Co Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
Question 1 1111111111
Question 2 1111111111
Question 3 0111100000
Question 4 1111111111
Question 5 1111100100
Question 6 1000111111
Question 7 1111110011
Question 8 1111000011
Question 9 0000000000
F-score 7777754566
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