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Rio Tinto PLC (NYSE:RIO)
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 = 8 or 9
Bad or low score = 0 or 1

Rio Tinto PLC has an F-score of 7 indicating the company's financial situation is typical for a stable company.

RIO' s 10-Year Piotroski F-Score Range
Min: 3   Max: 9
Current: 7

3
9

During the past 13 years, the highest Piotroski F-Score of Rio Tinto PLC was 9. The lowest was 3. 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 (Dec13) TTM:Last Year (Dec12) TTM:
Net Income was $3,665 Mil.
Cash Flow from Operations was $15,078 Mil.
Revenue was $51,171 Mil.
Gross Profit was $15,067 Mil.
Total Assets at the begining of this year (Dec12) was $118,437 Mil.
Total Assets was $111,025 Mil.
Long-Term Debt was $1,255 Mil.
Total Current Assets was $22,282 Mil.
Total Current Liabilities was $15,190 Mil.
Net Income was $-3,028 Mil.

Revenue was $50,942 Mil.
Gross Profit was $13,408 Mil.
Total Assets at the begining of last year (Dec11) was $120,152 Mil.
Total Assets was $118,437 Mil.
Long-Term Debt was $1,603 Mil.
Total Current Assets was $20,510 Mil.
Total Current Liabilities was $13,980 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.

Rio Tinto PLC's current net income was 3,665. ==> 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.

Rio Tinto PLC's current cash flow from operations was 15,078. ==> 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/Total Assets at the beginning of this year (Dec12)
=3665/118437
=0.03094472

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Dec11)
=-3028/120152
=-0.02520141

Rio Tinto PLC's return on assets of this year was 0.03094472. Rio Tinto PLC's return on assets of last year was -0.02520141. ==> 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.

Rio Tinto PLC's current net income was 3,665. Rio Tinto PLC's current cash flow from operations was 15,078. ==> 15,078 > 3,665 ==> 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 1 if gearing is lower, 0 if it’s higher.

Gearing (This Year)=Long-Term Debt/Total Assets
=1255/111025
=0.01130376

Gearing (Last Year)=Long-Term Debt/Total Assets
=1603/118437
=0.01353462

Rio Tinto PLC's gearing of this year was 0.01130376. Rio Tinto PLC's gearing of last year was 0.01353462. ==> This year is lower. ==> 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)=Total Current Assets/Total Current Liabilities
=22282/15190
=1.46688611

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=20510/13980
=1.46709585

Rio Tinto PLC's current ratio of this year was 1.46688611. Rio Tinto PLC's current ratio of last year was 1.46709585. ==> 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 1 if there is fewer number of shares in issue this year. Score 0 otherwise.

Rio Tinto PLC's number of shares in issue this year was 1857.7. Rio Tinto PLC's number of shares in issue last year was 1849.1. ==> There is more 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)=Gross Profit/Revenue
=15067/51171
=0.29444412

Gross Margin (Last Year)=Gross Profit/Revenue
=13408/50942
=0.26320129

Rio Tinto PLC's gross margin of this year was 0.29444412. Rio Tinto PLC's gross margin of last year was 0.26320129. ==> This year's gross margin is higher. ==> Score 1.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales 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/Total Assets at the beginning of this year (Dec12)
=51171/118437
=0.43205248

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Dec11)
=50942/120152
=0.42397963

Rio Tinto PLC's asset turnover of this year was 0.43205248. Rio Tinto PLC's asset turnover of last year was 0.42397963. ==> 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+0+1+1
=7

Good or high score = 8 or 9

Bad or low score = 0 or 1

Rio Tinto PLC has an F-score of 7 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.

Rio Tinto PLC Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1111111101
Q2 1111111111
Q3 1110011001
Q4 1111111111
Q5 1110111011
Q6 1100011000
Q7 1111000110
Q8 1111001101
Q9 1111001001
F-score 9986468547
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