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McCormick & Company Inc (NYSE:MKC)
Piotroski F-Score
7 (As of Today)

Good Sign:

Piotroski F-Score of 7 is 7, indicating very healthy situation.

The zones of discrimination were as such:

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

McCormick & Company Inc has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.

MKC' s 10-Year Piotroski F-Score Range
Min: 4   Max: 8
Current: 7

4
8

During the past 13 years, the highest Piotroski F-Score of McCormick & Company Inc was 8. The lowest was 4. And the median was 7.


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 (Nov14) TTM:Last Year (Nov13) TTM:
Net Income was 82.5 + 84.5 + 122.9 + 148 = $438 Mil.
Cash Flow from Operations was 76.7 + 105.4 + 93.7 + 227.8 = $504 Mil.
Revenue was 993.4 + 1033.4 + 1042.8 + 1173.6 = $4,243 Mil.
Gross Profit was 391.5 + 412.5 + 420.1 + 506.1 = $1,730 Mil.
Average Total Assets from the begining of this year (Nov13)
to the end of this year (Nov14) was
(4449.7 + 4429.7 + 4409.3 + 4472.1 + 4414.3) / 5 = $4435.02 Mil.
Total Assets at the begining of this year (Nov13) was $4,450 Mil.
Long-Term Debt was $1,014 Mil.
Total Current Assets was $1,416 Mil.
Total Current Liabilities was $1,122 Mil.
Net Income was 76 + 78.6 + 104.4 + 130 = $389 Mil.

Revenue was 934.4 + 1002.6 + 1016.4 + 1170 = $4,123 Mil.
Gross Profit was 361.7 + 394.4 + 407.6 + 502.2 = $1,666 Mil.
Average Total Assets from the begining of last year (Nov12)
to the end of last year (Nov13) was
(4165.4 + 4086.1 + 4208.8 + 4353 + 4449.7) / 5 = $4252.6 Mil.
Total Assets at the begining of last year (Nov12) was $4,165 Mil.
Long-Term Debt was $1,019 Mil.
Total Current Assets was $1,370 Mil.
Total Current Liabilities was $1,063 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.

McCormick & Company Inc's current net income (TTM) was 438. ==> 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.

McCormick & Company Inc's current cash flow from operations (TTM) was 504. ==> 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 (Nov13)
=437.9/4449.7
=0.09841113

McCormick & Company Inc's return on assets of this year was 0.09841113. McCormick & Company Inc's return on assets of last year was 0.09338839. ==> This year is higher. ==> Score 1.

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.

McCormick & Company Inc's current net income (TTM) was 438. McCormick & Company Inc's current cash flow from operations (TTM) was 504. ==> 504 > 438 ==> 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: Nov14)=Long-Term Debt/Average Total Assets from Nov13 to Nov14
=1014.1/4435.02
=0.22865737

Gearing (Last Year: Nov13)=Long-Term Debt/Average Total Assets from Nov12 to Nov13
=1019/4252.6
=0.23961812

McCormick & Company Inc's gearing of this year was 0.22865737. McCormick & Company Inc's gearing of last year was 0.23961812. ==> 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: Nov14)=Total Current Assets/Total Current Liabilities
=1416.2/1122
=1.26221034

Current Ratio (Last Year: Nov13)=Total Current Assets/Total Current Liabilities
=1370.2/1063.1
=1.28887217

McCormick & Company Inc's current ratio of this year was 1.26221034. McCormick & Company Inc's current ratio of last year was 1.28887217. ==> 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.

McCormick & Company Inc's number of shares in issue this year was 130.1. McCormick & Company Inc's number of shares in issue last year was 133.3. ==> 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
=1730.2/4243.2
=0.4077583

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1665.9/4123.4
=0.40401125

McCormick & Company Inc's gross margin of this year was 0.4077583. McCormick & Company Inc's gross margin of last year was 0.40401125. ==> 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 (Nov13)
=4243.2/4449.7
=0.95359238

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Nov12)
=4123.4/4165.4
=0.98991693

McCormick & Company Inc's asset turnover of this year was 0.95359238. McCormick & Company Inc's asset turnover of last year was 0.98991693. ==> 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+1+1+1+0+1+1+0
=7

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

McCormick & Company Inc has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.


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.

McCormick & Company Inc Annual Data

Nov05Nov06Nov07Nov08Nov09Nov10Nov11Nov12Nov13Nov14
Question 1 1111111111
Question 2 1111111111
Question 3 0011111001
Question 4 1101110111
Question 5 1010110101
Question 6 1100111010
Question 7 1111001111
Question 8 1100110011
Question 9 0101001010
F-score 7756776577

McCormick & Company Inc Quarterly Data

Aug12Nov12Feb13May13Aug13Nov13Feb14May14Aug14Nov14
Question 1 1111111111
Question 2 1111111111
Question 3 0000000001
Question 4 1111111111
Question 5 1111100011
Question 6 0000011110
Question 7 0111111111
Question 8 0000011111
Question 9 0000011000
F-score 4555577677
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