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GuruFocus has detected 4 Warning Signs with Sears Holdings Corp $SHLD.
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Sears Holdings Corp (NAS:SHLD)
Piotroski F-Score
2 (As of Today)

Warning Sign:

Piotroski F-Score of 2 is low, which usually implies poor business operation.

The zones of discrimination were as such:

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

Sears Holdings Corp has an F-score of 2. It is a bad or low score, which usually implies poor business operation.

SHLD' s Piotroski F-Score Range Over the Past 10 Years
Min: 1   Max: 9
Current: 2

1
9

During the past 13 years, the highest Piotroski F-Score of Sears Holdings Corp was 9. The lowest was 1. And the median was 5.


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 local exchange's currency.

This Year (Oct16) TTM:Last Year (Oct15) TTM:
Net Income was -580 + -471 + -395 + -748 = $-2,194 Mil.
Cash Flow from Operations was -113 + -722 + 82 + -768 = $-1,521 Mil.
Revenue was 7303 + 5394 + 5663 + 5029 = $23,389 Mil.
Gross Profit was 1595 + 1177 + 1260 + 962 = $4,994 Mil.
Average Total Assets from the begining of this year (Oct15)
to the end of this year (Oct16) was
(12769 + 11337 + 11175 + 10614 + 10865) / 5 = $11352 Mil.
Total Assets at the begining of this year (Oct15) was $12,769 Mil.
Long-Term Debt was $3,087 Mil.
Total Current Assets was $5,966 Mil.
Total Current Liabilities was $5,730 Mil.
Net Income was -159 + -303 + 208 + -454 = $-708 Mil.

Revenue was 8099 + 5882 + 6211 + 5750 = $25,942 Mil.
Gross Profit was 1978 + 1518 + 1435 + 1262 = $6,193 Mil.
Average Total Assets from the begining of last year (Oct14)
to the end of last year (Oct15) was
(15169 + 13185 + 13290 + 13186 + 12769) / 5 = $13519.8 Mil.
Total Assets at the begining of last year (Oct14) was $15,169 Mil.
Long-Term Debt was $2,124 Mil.
Total Current Assets was $7,219 Mil.
Total Current Liabilities was $6,518 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.

Sears Holdings Corp's current net income (TTM) was -2,194. ==> Negative ==> Score 0.

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.

Sears Holdings Corp's current cash flow from operations (TTM) was -1,521. ==> Negative ==> Score 0.

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 (Oct15)
=-2194/12769
=-0.17182238

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Oct14)
=-708/15169
=-0.04667414

Sears Holdings Corp's return on assets of this year was -0.17182238. Sears Holdings Corp's return on assets of last year was -0.04667414. ==> Last year is higher ==> Score 0.

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.

Sears Holdings Corp's current net income (TTM) was -2,194. Sears Holdings Corp's current cash flow from operations (TTM) was -1,521. ==> -1,521 > -2,194 ==> 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: Oct16)=Long-Term Debt/Average Total Assets from Oct15 to Oct16
=3087/11352
=0.27193446

Gearing (Last Year: Oct15)=Long-Term Debt/Average Total Assets from Oct14 to Oct15
=2124/13519.8
=0.15710292

Sears Holdings Corp's gearing of this year was 0.27193446. Sears Holdings Corp's gearing of last year was 0.15710292. ==> 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: Oct16)=Total Current Assets/Total Current Liabilities
=5966/5730
=1.04118674

Current Ratio (Last Year: Oct15)=Total Current Assets/Total Current Liabilities
=7219/6518
=1.10754833

Sears Holdings Corp's current ratio of this year was 1.04118674. Sears Holdings Corp's current ratio of last year was 1.10754833. ==> 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.

Sears Holdings Corp's number of shares in issue this year was 107. Sears Holdings Corp's number of shares in issue last year was 106.6. ==> There is larger number of shares in issue this year. ==> Score 0.

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
=4994/23389
=0.21351918

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=6193/25942
=0.23872485

Sears Holdings Corp's gross margin of this year was 0.21351918. Sears Holdings Corp's gross margin of last year was 0.23872485. ==> 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 (Oct15)
=23389/12769
=1.83170178

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Oct14)
=25942/15169
=1.71019843

Sears Holdings Corp's asset turnover of this year was 1.83170178. Sears Holdings Corp's asset turnover of last year was 1.71019843. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score= Que. 1+ Que. 2+ Que. 3+Que. 4+Que. 5+Que. 6+Que. 7+Que. 8+Que. 9
=0+0+0+1+0+0+0+0+1
=2

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

Sears Holdings Corp has an F-score of 2. It is a bad or low score, which usually implies poor business operation.


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 local exchange's currency.

Sears Holdings Corp Annual Data

Jan07Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16
Question 1 1111100000
Question 2 1111100000
Question 3 0001001001
Question 4 0111011110
Question 5 1111010001
Question 6 1010100001
Question 7 0111111000
Question 8 1001001001
Question 9 0011001101
F-score 5578435215

Sears Holdings Corp Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
Question 1 0000000000
Question 2 0000000000
Question 3 0000111000
Question 4 1111000001
Question 5 0000011000
Question 6 0000111100
Question 7 1101000010
Question 8 0000111000
Question 9 0000011111
F-score 2212355222
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