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Netflix Inc (NAS:NFLX)
Piotroski F-Score
3 (As of Today)

Warning Sign:

Piotroski F-Score of 3 is low, which usually implies poor business operation.

The zones of discrimination were as such:

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

Netflix Inc has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

NFLX' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 8
Current: 3

4
8

During the past 13 years, the highest Piotroski F-Score of Netflix Inc 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 (Sep15) TTM:Last Year (Sep14) TTM:
Net Income was 0 + 23.696 + 26.335 + 29.432 = $79 Mil.
Cash Flow from Operations was -38.461 + -127.382 + -181.343 + -195.969 = $-543 Mil.
Revenue was 0 + 1573.129 + 1644.694 + 1738.355 = $4,956 Mil.
Gross Profit was 0 + 526.728 + 522.942 + 564.397 = $1,614 Mil.
Average Total Assets from the begining of this year (Sep14)
to the end of this year (Sep15) was
(6778.329 + 7042.5 + 9240.626 + 9654.861 + 9916.267) / 5 = $8526.5166 Mil.
Total Assets at the begining of this year (Sep14) was $6,778 Mil.
Long-Term Debt was $2,400 Mil.
Total Current Assets was $5,570 Mil.
Total Current Liabilities was $3,341 Mil.
Net Income was 0 + 53.115 + 71.018 + 59.295 = $183 Mil.

Revenue was 0 + 1270.089 + 1340.407 + 1409.432 = $4,020 Mil.
Gross Profit was 0 + 400.903 + 425.559 + 455.038 = $1,282 Mil.
Average Total Assets from the begining of last year (Sep13)
to the end of last year (Sep14) was
(4901.325 + 5412.563 + 6048.106 + 6325.822 + 6778.329) / 5 = $5893.229 Mil.
Total Assets at the begining of last year (Sep13) was $4,901 Mil.
Long-Term Debt was $900 Mil.
Total Current Assets was $3,823 Mil.
Total Current Liabilities was $2,549 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.

Netflix Inc's current net income (TTM) was 79. ==> 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.

Netflix Inc's current cash flow from operations (TTM) was -543. ==> Negative ==> Score 0.

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)
=79.463/6778.329
=0.0117231

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=183.428/4901.325
=0.03742417

Netflix Inc's return on assets of this year was 0.0117231. Netflix Inc's return on assets of last year was 0.03742417. ==> 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.

Netflix Inc's current net income (TTM) was 79. Netflix Inc's current cash flow from operations (TTM) was -543. ==> -543 <= 79 ==> CFROA <= ROA ==> Score 0.

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
=2400/8526.5166
=0.28147485

Gearing (Last Year: Sep14)=Long-Term Debt/Average Total Assets from Sep13 to Sep14
=900/5893.229
=0.15271764

Netflix Inc's gearing of this year was 0.28147485. Netflix Inc's gearing of last year was 0.15271764. ==> 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
=5569.713/3341.418
=1.66687107

Current Ratio (Last Year: Sep14)=Total Current Assets/Total Current Liabilities
=3823.482/2548.655
=1.50019599

Netflix Inc's current ratio of this year was 1.66687107. Netflix Inc's current ratio of last year was 1.50019599. ==> 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.

Netflix Inc's number of shares in issue this year was 437.6. Netflix Inc's number of shares in issue last year was 432.7. ==> There is larger number of shares in issue this year. ==> Score 0.

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
=1614.067/4956.178
=0.32566768

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1281.5/4019.928
=0.3187868

Netflix Inc's gross margin of this year was 0.32566768. Netflix Inc's gross margin of last year was 0.3187868. ==> 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)
=4956.178/6778.329
=0.73117991

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=4019.928/4901.325
=0.82017169

Netflix Inc's asset turnover of this year was 0.73117991. Netflix Inc's asset turnover of last year was 0.82017169. ==> 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+0+0+0+0+1+0+1+0
=3

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

Netflix Inc has an F-score of 3. It is a bad or low score, which usually implies poor business operation.


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.

Netflix Inc Annual Data

Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15
Question 1 1111111111
Question 2 1111111110
Question 3 1011110110
Question 4 1111111100
Question 5 1000111000
Question 6 1001000111
Question 7 0111100001
Question 8 1001100111
Question 9 1001110001
F-score 8458864655

Netflix Inc Quarterly Data

Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15
Question 1 1111111111
Question 2 1111110000
Question 3 1111110000
Question 4 0111000000
Question 5 1010000000
Question 6 1111111111
Question 7 0000000001
Question 8 1111111111
Question 9 0000000001
F-score 6676553335
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