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McCormick & Company Inc (NYSE:MKC)
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

McCormick & Company Inc has an F-score of 6 indicating the company's financial situation is typical for a stable company.

MKC' s 10-Year Piotroski F-Score Range
Min: 3   Max: 9
Current: 6

3
9

During the past 13 years, the highest Piotroski F-Score of McCormick & Company Inc was 9. The lowest was 3. 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 (May14) TTM:Last Year (May13) TTM:
Net Income was 84.5 + 82.5 + 127.6 + 104.6 = $399 Mil.
Cash Flow from Operations was 105.4 + 76.7 + 237.8 + 94.7 = $515 Mil.
Revenue was 1033.4 + 993.4 + 1170 + 1016.4 = $4,213 Mil.
Gross Profit was 412.5 + 391.5 + 502.2 + 407.6 = $1,714 Mil.
Total Assets at the begining of this year (May13) was $4,209 Mil.
Total Assets was $4,409 Mil.
Long-Term Debt was $1,017 Mil.
Total Current Assets was $1,325 Mil.
Total Current Liabilities was $1,003 Mil.
Net Income was 78.6 + 76 + 145 + 104.8 = $404 Mil.

Revenue was 1002.6 + 934.4 + 1145.8 + 977.7 = $4,061 Mil.
Gross Profit was 394.4 + 361.7 + 482.4 + 391.7 = $1,630 Mil.
Total Assets at the begining of last year (May12) was $3,966 Mil.
Total Assets was $4,209 Mil.
Long-Term Debt was $774 Mil.
Total Current Assets was $1,218 Mil.
Total Current Liabilities was $1,226 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.

McCormick & Company Inc's current net income was 399. ==> 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.

McCormick & Company Inc's current cash flow from operations was 515. ==> 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 (May13)
=399.2/4208.8
=0.09484889

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (May12)
=404.4/3965.7
=0.10197443

McCormick & Company Inc's return on assets of this year was 0.09484889. McCormick & Company Inc's return on assets of last year was 0.10197443. ==> 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.

McCormick & Company Inc's current net income was 399. McCormick & Company Inc's current cash flow from operations was 515. ==> 515 > 399 ==> 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
=1016.8/4409.3
=0.2306035

Gearing (Last Year)=Long-Term Debt/Total Assets
=774.4/4208.8
=0.18399544

McCormick & Company Inc's gearing of this year was 0.2306035. McCormick & Company Inc's gearing of last year was 0.18399544. ==> Last year is lower than this year ==> Score 0.

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
=1324.7/1002.8
=1.3210012

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=1217.5/1226.2
=0.99290491

McCormick & Company Inc's current ratio of this year was 1.3210012. McCormick & Company Inc's current ratio of last year was 0.99290491. ==> This year's current ratio is higher. ==> Score 1.

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.

McCormick & Company Inc's number of shares in issue this year was 131.2. McCormick & Company Inc's number of shares in issue last year was 133.6. ==> 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
=1713.8/4213.2
=0.4067692

Gross Margin (Last Year)=Gross Profit/Revenue
=1630.2/4060.5
=0.40147765

McCormick & Company Inc's gross margin of this year was 0.4067692. McCormick & Company Inc's gross margin of last year was 0.40147765. ==> 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 (May13)
=4213.2/4208.8
=1.00104543

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (May12)
=4060.5/3965.7
=1.02390499

McCormick & Company Inc's asset turnover of this year was 1.00104543. McCormick & Company Inc's asset turnover of last year was 1.02390499. ==> 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+0+1+1+1+0
=6

Good or high score = 8 or 9

Bad or low score = 0 or 1

McCormick & Company Inc 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.

McCormick & Company Inc Annual Data

Nov04Nov05Nov06Nov07Nov08Nov09Nov10Nov11Nov12Nov13
Q1 1111111111
Q2 1111111111
Q3 0001111100
Q4 1110111011
Q5 1001011010
Q6 1110011101
Q7 1111100111
Q8 1110011001
Q9 1010100101
F-score 8675677657

McCormick & Company Inc Quarterly Data

Feb12May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14
Q1 1111111111
Q2 1111111111
Q3 0000000000
Q4 1111111111
Q5 0011111000
Q6 0100000111
Q7 1101111111
Q8 0000000111
Q9 1100000110
F-score 5645555776
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