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Rackspace Hosting Inc (NYSE:RAX)
Piotroski F-Score
4 (As of Today)

The zones of discrimination were as such:

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

Rackspace Hosting Inc has an F-score of 4 indicating the company's financial situation is typical for a stable company.

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

4
8

During the past 10 years, the highest Piotroski F-Score of Rackspace Hosting 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 (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was 16.311 + 20.798 + 25.446 + 22.451 = $85 Mil.
Cash Flow from Operations was 114.55 + 109.518 + 141.659 + 124.537 = $490 Mil.
Revenue was 388.636 + 408.103 + 421.047 + 441.112 = $1,659 Mil.
Gross Profit was 261.232 + 274.282 + 280.63 + 296.061 = $1,112 Mil.
Average Total Assets from the begining of this year (Jun13)
to the end of this year (Jun14) was
(1377.928 + 1451.769 + 1491.797 + 1566.949 + 1647.975) / 5 = $1,507 Mil.
Total Assets was $1,648 Mil.
Long-Term Debt was $51 Mil.
Total Current Assets was $518 Mil.
Total Current Liabilities was $279 Mil.
Net Income was 27.197 + 29.907 + 27.261 + 22.367 = $107 Mil.

Revenue was 335.985 + 352.909 + 362.2 + 375.847 = $1,427 Mil.
Gross Profit was 228.637 + 243.897 + 248.59 + 258.189 = $979 Mil.
Average Total Assets from the begining of last year (Jun12)
to the end of last year (Jun13) was
(1138.728 + 1241.765 + 1295.551 + 1348.35 + 1377.928) / 5 = $1,280 Mil.
Total Assets was $1,378 Mil.
Long-Term Debt was $36 Mil.
Total Current Assets was $417 Mil.
Total Current Liabilities was $248 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.

Rackspace Hosting Inc's current net income (ttm) was 85. ==> 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.

Rackspace Hosting Inc's current cash flow from operations (ttm) was 490. ==> 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
=85.006/1507.2836
=0.05639682

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Jun12 to Jun13
=106.732/1280.4644
=0.08335413

Rackspace Hosting Inc's return on assets of this year was 0.05639682. Rackspace Hosting Inc's return on assets of last year was 0.08335413. ==> 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.

Rackspace Hosting Inc's current net income (ttm) was 85. Rackspace Hosting Inc's current cash flow from operations (ttm) was 490. ==> 490 > 85 ==> CFROA > ROA ==> Score 1.

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
=51.262/1647.975
=0.03110605

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=36.381/1377.928
=0.02640269

Rackspace Hosting Inc's gearing of this year was 0.03110605. Rackspace Hosting Inc's gearing of last year was 0.02640269. ==> 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
=517.733/279.052
=1.85532804

Current Ratio (Last Year: Jun13)=Total Current Assets/Total Current Liabilities
=416.774/248.408
=1.6777801

Rackspace Hosting Inc's current ratio of this year was 1.85532804. Rackspace Hosting Inc's current ratio of last year was 1.6777801. ==> 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.

Rackspace Hosting Inc's number of shares in issue this year was 144.1. Rackspace Hosting Inc's number of shares in issue last year was 142.2. ==> 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
=1112.205/1658.898
=0.67044809

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=979.313/1426.941
=0.68630238

Rackspace Hosting Inc's gross margin of this year was 0.67044809. Rackspace Hosting Inc's gross margin of last year was 0.68630238. ==> Last year's gross margin is higher ==> Score 0.

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
=1658.898/1507.2836
=1.10058784

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Jun12 to Jun13
=1426.941/1280.4644
=1.11439334

Rackspace Hosting Inc's asset turnover of this year was 1.10058784. Rackspace Hosting Inc's asset turnover of last year was 1.11439334. ==> 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+0+0+0
=4

Good or high score = 8 or 9

Bad or low score = 0 or 1

Rackspace Hosting Inc has an F-score of 4 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.

Rackspace Hosting Inc Annual Data

Dec03Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 111111
Q2 111111
Q3 10
Q4 11
Q5 11
Q6 01
Q7 00
Q8 10
Q9 10
F-score 75

Rackspace Hosting Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 1111111111
Q2 1111111111
Q3 1111100000
Q4 1111111111
Q5 1111111110
Q6 1111111111
Q7 0000000000
Q8 1000011000
Q9 1100000000
F-score 8776566554
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