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GuruFocus has detected 6 Warning Signs with Procter & Gamble Co $PG.
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Procter & Gamble Co (NYSE:PG)
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

Procter & Gamble Co has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.

PG' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 8
Current: 7

4
8

During the past 13 years, the highest Piotroski F-Score of Procter & Gamble 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 local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 2750 + 1951 + 2714 + 7875 = $15,290 Mil.
Cash Flow from Operations was 3278 + 4139 + 3025 + 3000 = $13,442 Mil.
Revenue was 15755 + 16102 + 16518 + 16856 = $65,231 Mil.
Gross Profit was 7840 + 7720 + 8416 + 8558 = $32,534 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(129143 + 127508 + 127136 + 129043 + 117033) / 5 = $125972.6 Mil.
Total Assets at the begining of this year (Dec15) was $129,143 Mil.
Long-Term Debt was $16,460 Mil.
Total Current Assets was $25,572 Mil.
Total Current Liabilities was $28,891 Mil.
Net Income was 2153 + 521 + 2601 + 3206 = $8,481 Mil.

Revenue was 16930 + 16553 + 16527 + 16915 = $66,925 Mil.
Gross Profit was 8003 + 7716 + 8375 + 8455 = $32,549 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(136263 + 130937 + 129495 + 129265 + 129143) / 5 = $131020.6 Mil.
Total Assets at the begining of last year (Dec14) was $136,263 Mil.
Long-Term Debt was $17,595 Mil.
Total Current Assets was $36,347 Mil.
Total Current Liabilities was $32,053 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.

Procter & Gamble Co's current net income (TTM) was 15,290. ==> 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.

Procter & Gamble Co's current cash flow from operations (TTM) was 13,442. ==> 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 (Dec15)
=15290/129143
=0.11839589

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=8481/136263
=0.06223993

Procter & Gamble Co's return on assets of this year was 0.11839589. Procter & Gamble Co's return on assets of last year was 0.06223993. ==> 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.

Procter & Gamble Co's current net income (TTM) was 15,290. Procter & Gamble Co's current cash flow from operations (TTM) was 13,442. ==> 13,442 <= 15,290 ==> 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: Dec16)=Long-Term Debt/Average Total Assets from Dec15 to Dec16
=16460/125972.6
=0.13066333

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=17595/131020.6
=0.13429186

Procter & Gamble Co's gearing of this year was 0.13066333. Procter & Gamble Co's gearing of last year was 0.13429186. ==> 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: Dec16)=Total Current Assets/Total Current Liabilities
=25572/28891
=0.88511993

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=36347/32053
=1.13396562

Procter & Gamble Co's current ratio of this year was 0.88511993. Procter & Gamble Co's current ratio of last year was 1.13396562. ==> 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.

Procter & Gamble Co's number of shares in issue this year was 2737.6. Procter & Gamble Co's number of shares in issue last year was 2864.6. ==> 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
=32534/65231
=0.49875059

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=32549/66925
=0.48635039

Procter & Gamble Co's gross margin of this year was 0.49875059. Procter & Gamble Co's gross margin of last year was 0.48635039. ==> 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 (Dec15)
=65231/129143
=0.50510674

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=66925/136263
=0.4911458

Procter & Gamble Co's asset turnover of this year was 0.50510674. Procter & Gamble Co's asset turnover of last year was 0.4911458. ==> This year's asset turnover is higher. ==> Score 1.

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+0+1+0+1+1+1
=7

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

Procter & Gamble Co 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 local exchange's currency.

Procter & Gamble Co Annual Data

Jun07Jun08Jun09Jun10Jun11Jun12Jun13Jun14Jun15Jun16
Question 1 1111111111
Question 2 1111111111
Question 3 0111001001
Question 4 1111111111
Question 5 1110011010
Question 6 0101110111
Question 7 0111111111
Question 8 1001001011
Question 9 0101101001
F-score 5868668578

Procter & Gamble Co Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0000001111
Question 4 1111111110
Question 5 0111100001
Question 6 1111111100
Question 7 1111111111
Question 8 0001111111
Question 9 0000001111
F-score 5667768877
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