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Red Hat Inc (NYSE:RHT)
Piotroski F-Score
8 (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 = 8 or 9
Bad or low score = 0 or 1

Red Hat Inc has an F-score of 8. It is a good or high score, which usually indicates a very healthy situation.

RHT' s 10-Year Piotroski F-Score Range
Min: 1   Max: 9
Current: 8

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 (Aug14) TTM:Last Year (Aug13) TTM:
Net Income was 52.025 + 45.068 + 37.745 + 46.823 = $182 Mil.
Cash Flow from Operations was 95.154 + 184.682 + 164.686 + 107.737 = $552 Mil.
Revenue was 396.536 + 400.397 + 423.754 + 445.899 = $1,667 Mil.
Gross Profit was 336.109 + 339.861 + 359.311 + 378.725 = $1,414 Mil.
Average Total Assets from the begining of this year (Aug13)
to the end of this year (Aug14) was
(2739.581 + 2851.368 + 3106.619 + 3070.01 + 3067.304) / 5 = $2,967 Mil.
Total Assets as of Aug13 was $2,740 Mil.
Long-Term Debt was $0 Mil.
Total Current Assets was $1,326 Mil.
Total Current Liabilities was $1,134 Mil.
Net Income was 34.765 + 42.973 + 40.391 + 40.808 = $159 Mil.

Revenue was 343.606 + 347.885 + 363.259 + 374.423 = $1,429 Mil.
Gross Profit was 290.488 + 294.28 + 307.202 + 318.843 = $1,211 Mil.
Average Total Assets from the begining of last year (Aug12)
to the end of last year (Aug13) was
(2605.641 + 2661.899 + 2813.66 + 2654.933 + 2739.581) / 5 = $2,695 Mil.
Total Assets as of Aug12 was $2,606 Mil.
Long-Term Debt was $0 Mil.
Total Current Assets was $1,282 Mil.
Total Current Liabilities was $976 Mil.

Profitability

Q1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by beginning of the year total assets.

Score 1 if positive, 0 if negative.

Red Hat Inc's current net income (ttm) was 182. ==> Positive ==> Score 1.

Q2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by beginning of the year total assets.

Score 1 if positive, 0 if negative.

Red Hat Inc's current cash flow from operations (ttm) was 552. ==> 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)/Beginning of This Year Total Assets (Aug13)
=181.661/2739.581
=0.06630978

ROA (Last Year)=Net Income (TTM)/Beginning of Last Year Total Assets (Aug12)
=158.937/2605.641
=0.06099727

Red Hat Inc's return on assets of this year was 0.06630978. Red Hat Inc's return on assets of last year was 0.06099727. ==> 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.

Red Hat Inc's current net income (ttm) was 182. Red Hat Inc's current cash flow from operations (ttm) was 552. ==> 552 > 182 ==> 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: Aug14)=Long-Term Debt/Average Total Assets from Aug13 to Aug14
=0/2966.9764
=0

Gearing (Last Year: Aug13)=Long-Term Debt/Average Total Assets from Aug12 to Aug13
=0/2695.1428
=0

Red Hat Inc's gearing of this year was 0. Red Hat Inc's gearing of last year was 0. ==> This year is lower or equal to last year. ==> Score 1.

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: Aug14)=Total Current Assets/Total Current Liabilities
=1325.564/1134.009
=1.16891841

Current Ratio (Last Year: Aug13)=Total Current Assets/Total Current Liabilities
=1281.66/975.941
=1.31325562

Red Hat Inc's current ratio of this year was 1.16891841. Red Hat Inc's current ratio of last year was 1.31325562. ==> Last year's current ratio is higher ==> Score 0.

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 190.8. 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
=1414.006/1666.586
=0.84844466

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1210.813/1429.173
=0.84721234

Red Hat Inc's gross margin of this year was 0.84844466. Red Hat Inc's gross margin of last year was 0.84721234. ==> 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 begining of the year total assets) 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)/Beginning of This Year Total Assets (Aug13)
=1666.586/2739.581
=0.60833609

Asset Turnover (Last Year)=Revenue (TTM)/Beginning of Last Year Total Assets (Aug12)
=1429.173/2605.641
=0.54849191

Red Hat Inc's asset turnover of this year was 0.60833609. Red Hat Inc's asset turnover of last year was 0.54849191. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+1+1+1+0+1+1+1
=8

Good or high score = 8 or 9

Bad or low score = 0 or 1

Red Hat Inc has an F-score of 8. 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, 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.

Red Hat Inc Annual Data

Feb05Feb06Feb07Feb08Feb09Feb10Feb11Feb12Feb13Feb14
Q1 1111111111
Q2 1111111111
Q3 1100011101
Q4 1111111111
Q5 1111111101
Q6 0100100000
Q7 0100110011
Q8 1111010110
Q9 0110111111
F-score 6965786767

Red Hat Inc Quarterly Data

May12Aug12Nov12Feb13May13Aug13Nov13Feb14May14Aug14
Q1 1111111111
Q2 1111111111
Q3 1000001111
Q4 1111111111
Q5 1110111111
Q6 0000000000
Q7 1111111111
Q8 1111100011
Q9 0111111111
F-score 7776767788
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