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GuruFocus has detected 5 Warning Signs with Teva Pharmaceutical Industries Ltd $TEVA.
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Teva Pharmaceutical Industries Ltd (NYSE:TEVA)
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

Teva Pharmaceutical Industries Ltd has an F-score of 3. It is a bad or low score, which usually implies poor business operation.

TEVA' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 8
Current: 3

2
8

During the past 13 years, the highest Piotroski F-Score of Teva Pharmaceutical Industries Ltd was 8. The lowest was 2. 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 (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 636 + 254 + 412 + -973 = $329 Mil.
Cash Flow from Operations was 1376 + 963 + 1461 + 1425 = $5,225 Mil.
Revenue was 4810 + 5038 + 5563 + 6492 = $21,903 Mil.
Gross Profit was 2791 + 2877 + 2801 + 3390 = $11,859 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(54258 + 55126 + 57920 + 98747 + 92890) / 5 = $71788.2 Mil.
Total Assets at the begining of this year (Dec15) was $54,258 Mil.
Long-Term Debt was $32,524 Mil.
Total Current Assets was $16,961 Mil.
Total Current Liabilities was $18,519 Mil.
Net Income was 446 + 539 + 103 + 500 = $1,588 Mil.

Revenue was 4982 + 4966 + 4823 + 4881 = $19,652 Mil.
Gross Profit was 2836 + 2902 + 2771 + 2847 = $11,356 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(46420 + 46951 + 50371 + 48625 + 54258) / 5 = $49325 Mil.
Total Assets at the begining of last year (Dec14) was $46,420 Mil.
Long-Term Debt was $8,383 Mil.
Total Current Assets was $18,398 Mil.
Total Current Liabilities was $13,005 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.

Teva Pharmaceutical Industries Ltd's current net income (TTM) was 329. ==> 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.

Teva Pharmaceutical Industries Ltd's current cash flow from operations (TTM) was 5,225. ==> 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.

Teva Pharmaceutical Industries Ltd's return on assets of this year was 0.00606362. Teva Pharmaceutical Industries Ltd's return on assets of last year was 0.03420939. ==> 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.

Teva Pharmaceutical Industries Ltd's current net income (TTM) was 329. Teva Pharmaceutical Industries Ltd's current cash flow from operations (TTM) was 5,225. ==> 5,225 > 329 ==> 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
=32524/71788.2
=0.45305496

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=8383/49325
=0.16995438

Teva Pharmaceutical Industries Ltd's gearing of this year was 0.45305496. Teva Pharmaceutical Industries Ltd's gearing of last year was 0.16995438. ==> 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
=16961/18519
=0.91587019

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=18398/13005
=1.41468666

Teva Pharmaceutical Industries Ltd's current ratio of this year was 0.91587019. Teva Pharmaceutical Industries Ltd's current ratio of last year was 1.41468666. ==> 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.

Teva Pharmaceutical Industries Ltd's number of shares in issue this year was 961. Teva Pharmaceutical Industries Ltd's number of shares in issue last year was 864. ==> 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
=11859/21903
=0.54143268

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=11356/19652
=0.57785467

Teva Pharmaceutical Industries Ltd's gross margin of this year was 0.54143268. Teva Pharmaceutical Industries Ltd's gross margin of last year was 0.57785467. ==> 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)
=21903/54258
=0.40368241

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=19652/46420
=0.423352

Teva Pharmaceutical Industries Ltd's asset turnover of this year was 0.40368241. Teva Pharmaceutical Industries Ltd's asset turnover of last year was 0.423352. ==> 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

Teva Pharmaceutical Industries Ltd 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.

Teva Pharmaceutical Industries Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 1011000100
Question 4 0111111111
Question 5 1011011110
Question 6 0010010110
Question 7 0100111000
Question 8 1101011110
Question 9 0101100100
F-score 5667576863

Teva Pharmaceutical Industries Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 1111000000
Question 4 1111111111
Question 5 1110011100
Question 6 1110011100
Question 7 0000000000
Question 8 1111111100
Question 9 1110000000
F-score 8885466633
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