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GuruFocus has detected 6 Warning Signs with Sempra Energy $SRE.
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Sempra Energy (NYSE:SRE)
Piotroski F-Score
3 (As of Today)

Warning Sign:

Piotroski F-Score of 3 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

Sempra Energy has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

SRE' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 8
Current: 3

3
8

During the past 13 years, the highest Piotroski F-Score of Sempra Energy was 8. 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 local exchange's currency.

This Year (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 319 + 16 + 622 + 379 = $1,336 Mil.
Cash Flow from Operations was 592 + 290 + 809 + 628 = $2,319 Mil.
Revenue was 2622 + 2156 + 2535 + 2870 = $10,183 Mil.
Gross Profit was 1705 + 1124 + 1596 + 1904 = $6,329 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(41150 + 41835 + 42875 + 45526 + 47786) / 5 = $43834.4 Mil.
Total Assets at the begining of this year (Dec15) was $41,150 Mil.
Long-Term Debt was $14,429 Mil.
Total Current Assets was $3,110 Mil.
Total Current Liabilities was $5,927 Mil.
Net Income was 437 + 295 + 248 + 369 = $1,349 Mil.

Revenue was 2682 + 2367 + 2481 + 2701 = $10,231 Mil.
Gross Profit was 1722 + 1515 + 1489 + 1752 = $6,478 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(39651 + 39551 + 40006 + 40566 + 41150) / 5 = $40184.8 Mil.
Total Assets at the begining of last year (Dec14) was $39,651 Mil.
Long-Term Debt was $13,134 Mil.
Total Current Assets was $2,891 Mil.
Total Current Liabilities was $4,612 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.

Sempra Energy's current net income (TTM) was 1,336. ==> 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.

Sempra Energy's current cash flow from operations (TTM) was 2,319. ==> 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.

Sempra Energy's return on assets of this year was 0.03246659. Sempra Energy's return on assets of last year was 0.03402184. ==> 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.

Sempra Energy's current net income (TTM) was 1,336. Sempra Energy's current cash flow from operations (TTM) was 2,319. ==> 2,319 > 1,336 ==> 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: Dec16)=Long-Term Debt/Average Total Assets from Dec15 to Dec16
=14429/43834.4
=0.3291707

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=13134/40184.8
=0.32684

Sempra Energy's gearing of this year was 0.3291707. Sempra Energy's gearing of last year was 0.32684. ==> 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: Dec16)=Total Current Assets/Total Current Liabilities
=3110/5927
=0.52471739

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=2891/4612
=0.62684302

Sempra Energy's current ratio of this year was 0.52471739. Sempra Energy's current ratio of last year was 0.62684302. ==> 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.

Sempra Energy's number of shares in issue this year was 251.2. Sempra Energy's number of shares in issue last year was 250.9. ==> 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
=6329/10183
=0.62152607

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=6478/10231
=0.63317369

Sempra Energy's gross margin of this year was 0.62152607. Sempra Energy's gross margin of last year was 0.63317369. ==> 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 (Dec15)
=10183/41150
=0.24746051

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=10231/39651
=0.25802628

Sempra Energy's asset turnover of this year was 0.24746051. Sempra Energy's asset turnover of last year was 0.25802628. ==> 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+0+1+0+0+0+0+0
=3

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

Sempra Energy has an F-score of 3. 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.

Sempra Energy Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 0110101110
Question 4 1111111111
Question 5 1000001000
Question 6 0001011000
Question 7 0110100000
Question 8 1010110010
Question 9 0001100100
F-score 5565756553

Sempra Energy Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 1111110000
Question 4 1111111111
Question 5 0001101100
Question 6 1000000000
Question 7 0000000000
Question 8 0011111010
Question 9 1110000000
F-score 6566655443
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