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

The zones of discrimination were as such:

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

Netflix Inc has an F-score of 5 indicating the company's financial situation is typical for a stable company.

NFLX' s 10-Year Piotroski F-Score Range
Min: 2   Max: 8
Current: 5

2
8

During the past 13 years, the highest Piotroski F-Score of Netflix Inc was 8. The lowest was 2. 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 31.822 + 48.421 + 53.115 + 71.018 = $204 Mil.
Cash Flow from Operations was 34.693 + 41.445 + 36.359 + 56.024 = $169 Mil.
Revenue was 1105.999 + 1175.23 + 1270.089 + 1340.407 = $4,892 Mil.
Gross Profit was 314.98 + 363.381 + 400.903 + 425.559 = $1,505 Mil.
Average Total Assets from the begining of this year (Jun13)
to the end of this year (Jun14) was
(4480.751 + 4901.325 + 5412.563 + 6048.106 + 6325.822) / 5 = $5,434 Mil.
Total Assets was $6,326 Mil.
Long-Term Debt was $900 Mil.
Total Current Assets was $3,668 Mil.
Total Current Liabilities was $2,335 Mil.
Net Income was 7.675 + 7.897 + 2.689 + 29.471 = $48 Mil.

Revenue was 905.089 + 945.239 + 1023.961 + 1069.372 = $3,944 Mil.
Gross Profit was 242.451 + 249.372 + 287.009 + 308.698 = $1,088 Mil.
Average Total Assets from the begining of last year (Jun12)
to the end of last year (Jun13) was
(3478.29 + 3808.833 + 3967.89 + 4363.289 + 4480.751) / 5 = $4,020 Mil.
Total Assets was $4,481 Mil.
Long-Term Debt was $500 Mil.
Total Current Assets was $2,570 Mil.
Total Current Liabilities was $1,670 Mil.

Profitability

Q1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by average total assets throughout the year.

Score 1 if positive, 0 if negative.

Netflix Inc's current net income (ttm) was 204. ==> Positive ==> Score 1.

Q2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by average total assets throughout the year.

Score 1 if positive, 0 if negative.

Netflix Inc's current cash flow from operations (ttm) was 169. ==> 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 (TTM)/Average Total Assets from Jun13 to Jun14
=204.376/5433.7134
=0.03761258

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Jun12 to Jun13
=47.732/4019.8106
=0.01187419

Netflix Inc's return on assets of this year was 0.03761258. Netflix Inc's return on assets of last year was 0.01187419. ==> This year is higher. ==> Score 1.

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.

Netflix Inc's current net income (ttm) was 204. Netflix Inc's current cash flow from operations (ttm) was 169. ==> 169 =< 204 ==> CFROA =< ROA ==> Score 0.

Funding

Q5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Jun14)=Long-Term Debt/Total Assets
=900/6325.822
=0.142274

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=500/4480.751
=0.11158844

Netflix Inc's gearing of this year was 0.142274. Netflix Inc's gearing of last year was 0.11158844. ==> 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: Jun14)=Total Current Assets/Total Current Liabilities
=3668.38/2335.124
=1.57095726

Current Ratio (Last Year: Jun13)=Total Current Assets/Total Current Liabilities
=2570.322/1670.264
=1.5388717

Netflix Inc's current ratio of this year was 1.57095726. Netflix Inc's current ratio of last year was 1.5388717. ==> 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.

Netflix Inc's number of shares in issue this year was 61.6. Netflix Inc's number of shares in issue last year was 60.6. ==> There is larger number of shares in issue this year. ==> Score 0.

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: TTM)=Gross Profit/Revenue
=1504.823/4891.725
=0.30762625

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1087.53/3943.661
=0.2757666

Netflix Inc's gross margin of this year was 0.30762625. Netflix Inc's gross margin of last year was 0.2757666. ==> This year's gross margin is higher. ==> Score 1.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by average total assets throughout 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)/Average Total Assets from Jun13 to Jun14
=4891.725/5433.7134
=0.90025451

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Jun12 to Jun13
=3943.661/4019.8106
=0.98105642

Netflix Inc's asset turnover of this year was 0.90025451. Netflix Inc's asset turnover of last year was 0.98105642. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+1+0+0+1+0+1+0
=5

Good or high score = 8 or 9

Bad or low score = 0 or 1

Netflix Inc has an F-score of 5 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, Altman Z-Score, Beneish M-Score


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

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1111111111
Q2 1111111111
Q3 1111111101
Q4 1111111110
Q5 1110001110
Q6 0010010001
Q7 0001111000
Q8 0010011001
Q9 1111111111
F-score 6686688656

Netflix Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 1111111111
Q2 1111011111
Q3 0000001111
Q4 1111000000
Q5 1111011010
Q6 0110111111
Q7 0000000000
Q8 0000000111
Q9 0000000000
F-score 4554245565
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