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

The zones of discrimination were as such:

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

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

RAX' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 8
Current: 5

4
8

During the past 11 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 (Sep15) TTM:Last Year (Sep14) TTM:
Net Income was 36.953 + 28.4 + 29.2 + 36.5 = $131 Mil.
Cash Flow from Operations was 150.91 + 145.3 + 122.9 + 111.4 = $531 Mil.
Revenue was 472.457 + 480.2 + 489.4 + 508.9 = $1,951 Mil.
Gross Profit was 318.523 + 318.9 + 325.5 + 337.7 = $1,301 Mil.
Average Total Assets from the begining of this year (Sep14)
to the end of this year (Sep15) was
(1724.542 + 1624.284 + 1692.3 + 1832.6 + 1753.8) / 5 = $1725.5052 Mil.
Total Assets at the begining of this year (Sep14) was $1,725 Mil.
Long-Term Debt was $166 Mil.
Total Current Assets was $441 Mil.
Total Current Liabilities was $410 Mil.
Net Income was 20.798 + 25.4 + 22.5 + 25.7 = $94 Mil.

Revenue was 408.103 + 421 + 441.2 + 459.7 = $1,730 Mil.
Gross Profit was 274.282 + 280.6 + 296.1 + 316.8 = $1,168 Mil.
Average Total Assets from the begining of last year (Sep13)
to the end of last year (Sep14) was
(1451.769 + 1491.797 + 1566.949 + 1647.975 + 1724.542) / 5 = $1576.6064 Mil.
Total Assets at the begining of last year (Sep13) was $1,452 Mil.
Long-Term Debt was $78 Mil.
Total Current Assets was $554 Mil.
Total Current Liabilities was $284 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.

Rackspace Hosting Inc's current net income (TTM) was 131. ==> 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.

Rackspace Hosting Inc's current cash flow from operations (TTM) was 531. ==> 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 (Sep14)
=131.053/1724.542
=0.07599293

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=94.398/1451.769
=0.06502274

Rackspace Hosting Inc's return on assets of this year was 0.07599293. Rackspace Hosting Inc's return on assets of last year was 0.06502274. ==> 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.

Rackspace Hosting Inc's current net income (TTM) was 131. Rackspace Hosting Inc's current cash flow from operations (TTM) was 531. ==> 531 > 131 ==> CFROA > ROA ==> Score 1.

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
=165.9/1725.5052
=0.09614575

Gearing (Last Year: Sep14)=Long-Term Debt/Average Total Assets from Sep13 to Sep14
=78.214/1576.6064
=0.04960908

Rackspace Hosting Inc's gearing of this year was 0.09614575. Rackspace Hosting Inc's gearing of last year was 0.04960908. ==> 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
=440.7/409.9
=1.07514028

Current Ratio (Last Year: Sep14)=Total Current Assets/Total Current Liabilities
=553.954/284.263
=1.94873761

Rackspace Hosting Inc's current ratio of this year was 1.07514028. Rackspace Hosting Inc's current ratio of last year was 1.94873761. ==> 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.

Rackspace Hosting Inc's number of shares in issue this year was 140.6. Rackspace Hosting Inc's number of shares in issue last year was 144.9. ==> 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
=1300.623/1950.957
=0.66665898

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1167.782/1730.003
=0.67501733

Rackspace Hosting Inc's gross margin of this year was 0.66665898. Rackspace Hosting Inc's gross margin of last year was 0.67501733. ==> Last year's gross margin is higher ==> Score 0.

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)
=1950.957/1724.542
=1.13128993

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Sep13)
=1730.003/1451.769
=1.1916517

Rackspace Hosting Inc's asset turnover of this year was 1.13128993. Rackspace Hosting Inc's asset turnover of last year was 1.1916517. ==> 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+1+1+1+0+0+1+0+0
=5

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

Rackspace Hosting 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


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

Dec08Dec09Dec10Dec11Dec12Dec13Dec14
Question 1 1111111
Question 2 1111111
Question 3 0011101
Question 4 1111111
Question 5 1111110
Question 6 1001110
Question 7 0000000
Question 8 1101000
Question 9 0011001
F-score 6568655

Rackspace Hosting Inc Quarterly Data

Jun13Sep13Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15
Question 1 1111111111
Question 2 1111111111
Question 3 0000001111
Question 4 1111111111
Question 5 1111000000
Question 6 1111110100
Question 7 0000000001
Question 8 1100000110
Question 9 0000011100
F-score 6655455755
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