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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 = 8 or 9
Bad or low score = 0 or 1

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

MJN' s 10-Year Piotroski F-Score Range
Min: 4   Max: 8
Current: 6

4
8

During the past 11 years, the highest Piotroski F-Score of Mead Johnson Nutrition Co was 8. The lowest was 4. And the median was 6.


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 171.4 + 202.4 + 153.2 + 161.6 = $689 Mil.
Cash Flow from Operations was 106.4 + 197.6 + 214.6 + 192.2 = $711 Mil.
Revenue was 1111.1 + 1113.3 + 1060.7 + 1046.8 = $4,332 Mil.
Gross Profit was 684.3 + 707.6 + 668.7 + 681.3 = $2,742 Mil.
Total Assets at the begining of this year (Jun13) was $3,279 Mil.
Total Assets was $4,113 Mil.
Long-Term Debt was $1,502 Mil.
Total Current Assets was $2,772 Mil.
Total Current Liabilities was $1,744 Mil.
Net Income was 172 + 188 + 134.2 + 140.3 = $635 Mil.

Revenue was 1055.3 + 1037.9 + 981.1 + 921.3 = $3,996 Mil.
Gross Profit was 673.3 + 652.9 + 599.1 + 563.8 = $2,489 Mil.
Total Assets at the begining of last year (Jun12) was $2,960 Mil.
Total Assets was $3,279 Mil.
Long-Term Debt was $1,519 Mil.
Total Current Assets was $2,046 Mil.
Total Current Liabilities was $1,243 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.

Mead Johnson Nutrition Co's current net income was 689. ==> 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.

Mead Johnson Nutrition Co's current cash flow from operations was 711. ==> 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)
=688.6/3278.8
=0.21001586

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Jun12)
=634.5/2959.8
=0.21437259

Mead Johnson Nutrition Co's return on assets of this year was 0.21001586. Mead Johnson Nutrition Co's return on assets of last year was 0.21437259. ==> Last year is higher ==> Score 0.

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.

Mead Johnson Nutrition Co's current net income was 689. Mead Johnson Nutrition Co's current cash flow from operations was 711. ==> 711 > 689 ==> 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
=1502.1/4112.5
=0.36525228

Gearing (Last Year)=Long-Term Debt/Total Assets
=1518.9/3278.8
=0.46324875

Mead Johnson Nutrition Co's gearing of this year was 0.36525228. Mead Johnson Nutrition Co's gearing of last year was 0.46324875. ==> 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
=2772.2/1743.7
=1.5898377

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=2045.5/1242.6
=1.64614518

Mead Johnson Nutrition Co's current ratio of this year was 1.5898377. Mead Johnson Nutrition Co's current ratio of last year was 1.64614518. ==> 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.

Mead Johnson Nutrition Co's number of shares in issue this year was 202.7. Mead Johnson Nutrition Co's number of shares in issue last year was 203.2. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

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
=2741.9/4331.9
=0.63295552

Gross Margin (Last Year)=Gross Profit/Revenue
=2489.1/3995.6
=0.62296026

Mead Johnson Nutrition Co's gross margin of this year was 0.63295552. Mead Johnson Nutrition Co's gross margin of last year was 0.62296026. ==> 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)
=4331.9/3278.8
=1.32118458

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Jun12)
=3995.6/2959.8
=1.34995608

Mead Johnson Nutrition Co's asset turnover of this year was 1.32118458. Mead Johnson Nutrition Co's asset turnover of last year was 1.34995608. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+0+1+1+0+1+1+0
=6

Good or high score = 8 or 9

Bad or low score = 0 or 1

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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1111111
Q2 1111111
Q3 0000100
Q4 1111111
Q5 1101111
Q6 1011100
Q7 0100111
Q8 0010001
Q9 1100100
F-score 6655856

Mead Johnson Nutrition Co Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 1111111111
Q2 1111111111
Q3 0000100000
Q4 0111111111
Q5 1111111111
Q6 1000011000
Q7 1101111111
Q8 0000011111
Q9 0000000000
F-score 5545677666
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