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Red Hat Inc (NYSE:RHT)
Piotroski F-Score
6 (As of Today)

Good Sign:

Piotroski F-Score of 8 is 8, 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

Red Hat Inc has an F-score of 6 indicating the company's financial situation is typical for a stable company.

RHT' s 10-Year Piotroski F-Score Range
Min: 1   Max: 9
Current: 6

1
9

During the past 13 years, the highest Piotroski F-Score of Red Hat Inc was 9. The lowest was 1. And the median was 7.


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 (Nov14) TTM:Last Year (Nov13) TTM:
Net Income was 45.069 + 37.745 + 46.823 + 47.933 = $178 Mil.
Cash Flow from Operations was 184.682 + 164.686 + 107.737 + 132.988 = $590 Mil.
Revenue was 400.397 + 423.754 + 445.899 + 455.895 = $1,726 Mil.
Gross Profit was 339.861 + 359.311 + 378.725 + 384.53 = $1,462 Mil.
Average Total Assets from the begining of this year (Nov13)
to the end of this year (Nov14) was
(2851.368 + 3106.619 + 3070.01 + 3067.304 + 3547.871) / 5 = $3128.6344 Mil.
Total Assets at the begining of this year (Nov13) was $2,851 Mil.
Long-Term Debt was $711 Mil.
Total Current Assets was $1,705 Mil.
Total Current Liabilities was $1,173 Mil.
Net Income was 42.973 + 40.391 + 40.808 + 52.025 = $176 Mil.

Revenue was 347.885 + 363.259 + 374.423 + 396.536 = $1,482 Mil.
Gross Profit was 294.28 + 307.202 + 318.843 + 336.109 = $1,256 Mil.
Average Total Assets from the begining of last year (Nov12)
to the end of last year (Nov13) was
(2661.899 + 2813.66 + 2654.933 + 2739.581 + 2851.368) / 5 = $2744.2882 Mil.
Total Assets at the begining of last year (Nov12) was $2,662 Mil.
Long-Term Debt was $0 Mil.
Total Current Assets was $1,469 Mil.
Total Current Liabilities was $1,026 Mil.

Profitability

Q1. 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.

Red Hat Inc's current net income (TTM) was 178. ==> Positive ==> Score 1.

Q2. 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.

Red Hat Inc's current cash flow from operations (TTM) was 590. ==> 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)/Total Assets at the Beginning of This Year (Nov13)
=177.57/2851.368
=0.06227537

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Nov12)
=176.197/2661.899
=0.06619222

Red Hat Inc's return on assets of this year was 0.06227537. Red Hat Inc's return on assets of last year was 0.06619222. ==> 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.

Red Hat Inc's current net income (TTM) was 178. Red Hat Inc's current cash flow from operations (TTM) was 590. ==> 590 > 178 ==> CFROA > ROA ==> Score 1.

Funding

Q5. 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: Nov14)=Long-Term Debt/Average Total Assets from Nov13 to Nov14
=710.844/3128.6344
=0.22720584

Gearing (Last Year: Nov13)=Long-Term Debt/Average Total Assets from Nov12 to Nov13
=0/2744.2882
=0

Red Hat Inc's gearing of this year was 0.22720584. Red Hat Inc's gearing of last year was 0. ==> 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: Nov14)=Total Current Assets/Total Current Liabilities
=1705.017/1172.621
=1.45402223

Current Ratio (Last Year: Nov13)=Total Current Assets/Total Current Liabilities
=1468.6/1025.546
=1.43201768

Red Hat Inc's current ratio of this year was 1.45402223. Red Hat Inc's current ratio of last year was 1.43201768. ==> 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.

Red Hat Inc's number of shares in issue this year was 187.7. Red Hat Inc's number of shares in issue last year was 191.4. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

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
=1462.427/1725.945
=0.84731958

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1256.434/1482.103
=0.8477373

Red Hat Inc's gross margin of this year was 0.84731958. Red Hat Inc's gross margin of last year was 0.8477373. ==> 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 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 (Nov13)
=1725.945/2851.368
=0.60530419

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Nov12)
=1482.103/2661.899
=0.55678409

Red Hat Inc's asset turnover of this year was 0.60530419. Red Hat Inc's asset turnover of last year was 0.55678409. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+0+1+0+1+1+0+1
=6

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

Red Hat Inc has an F-score of 6 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.

Red Hat Inc Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
Q1 1111111111
Q2 1111111111
Q3 1100011101
Q4 1111111111
Q5 1111111011
Q6 0100100000
Q7 0100110011
Q8 1111010110
Q9 0110111111
F-score 6965786677

Red Hat Inc Quarterly Data

Aug12Nov12Feb13May13Aug13Nov13Feb14May14Aug14Nov14
Q1 1111111111
Q2 1111111111
Q3 0000011110
Q4 1111111111
Q5 1111111110
Q6 0000000001
Q7 1111111111
Q8 1111000110
Q9 1111111111
F-score 7777677886
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