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GuruFocus has detected 3 Warning Signs with Toll Brothers Inc $TOL.
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Toll Brothers Inc (NYSE:TOL)
Piotroski F-Score
5 (As of Today)

The zones of discrimination were as such:

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

Toll Brothers Inc has an F-score of 5 indicating the company's financial situation is typical for a stable company.

TOL' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 9
Current: 5

2
9

During the past 13 years, the highest Piotroski F-Score of Toll Brothers Inc was 9. The lowest was 2. And the median was 4.


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 (Jan17) TTM:Last Year (Jan16) TTM:
Net Income was 89.054 + 105.483 + 114.378 + 70.416 = $379 Mil.
Cash Flow from Operations was 7.345 + -309.373 + 474.024 + 41.964 = $214 Mil.
Revenue was 1115.557 + 1269.934 + 1855.451 + 920.73 = $5,162 Mil.
Gross Profit was 244.986 + 278.518 + 285.684 + 187.728 = $997 Mil.
Average Total Assets from the begining of this year (Jan16)
to the end of this year (Jan17) was
(8763.437 + 8964.225 + 9405.699 + 9736.789 + 9516.8) / 5 = $9277.39 Mil.
Total Assets at the begining of this year (Jan16) was $8,763 Mil.
Long-Term Debt was $3,632 Mil.
Total Current Assets was $7,926 Mil.
Total Current Liabilities was $1,563 Mil.
Net Income was 67.93 + 66.749 + 147.163 + 73.18 = $355 Mil.

Revenue was 852.583 + 1028.011 + 1437.202 + 928.566 = $4,246 Mil.
Gross Profit was 174.071 + 203.617 + 320.87 + 216.255 = $915 Mil.
Average Total Assets from the begining of last year (Jan15)
to the end of last year (Jan16) was
(8421.619 + 8587.681 + 8630.895 + 9206.515 + 8763.437) / 5 = $8722.0294 Mil.
Total Assets at the begining of last year (Jan15) was $8,422 Mil.
Long-Term Debt was $3,370 Mil.
Total Current Assets was $7,546 Mil.
Total Current Liabilities was $1,237 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.

Toll Brothers Inc's current net income (TTM) was 379. ==> 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.

Toll Brothers Inc's current cash flow from operations (TTM) was 214. ==> 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.

ROA (This Year)=Net Income (TTM)/Total Assets at the Beginning of This Year (Jan16)
=379.331/8763.437
=0.04328564

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Jan15)
=355.022/8421.619
=0.04215603

Toll Brothers Inc's return on assets of this year was 0.04328564. Toll Brothers Inc's return on assets of last year was 0.04215603. ==> This year is higher. ==> Score 1.

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.

Toll Brothers Inc's current net income (TTM) was 379. Toll Brothers Inc's current cash flow from operations (TTM) was 214. ==> 214 <= 379 ==> CFROA <= ROA ==> Score 0.

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: Jan17)=Long-Term Debt/Average Total Assets from Jan16 to Jan17
=3632.458/9277.39
=0.39153878

Gearing (Last Year: Jan16)=Long-Term Debt/Average Total Assets from Jan15 to Jan16
=3370.094/8722.0294
=0.38638875

Toll Brothers Inc's gearing of this year was 0.39153878. Toll Brothers Inc's gearing of last year was 0.38638875. ==> 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: Jan17)=Total Current Assets/Total Current Liabilities
=7925.888/1563.318
=5.06991412

Current Ratio (Last Year: Jan16)=Total Current Assets/Total Current Liabilities
=7545.644/1237.378
=6.09809129

Toll Brothers Inc's current ratio of this year was 5.06991412. Toll Brothers Inc's current ratio of last year was 6.09809129. ==> 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.

Toll Brothers Inc's number of shares in issue this year was 170.4. Toll Brothers Inc's number of shares in issue last year was 182.4. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

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
=996.916/5161.672
=0.19313819

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=914.813/4246.362
=0.21543453

Toll Brothers Inc's gross margin of this year was 0.19313819. Toll Brothers Inc's gross margin of last year was 0.21543453. ==> 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 (Jan16)
=5161.672/8763.437
=0.58900087

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Jan15)
=4246.362/8421.619
=0.50422158

Toll Brothers Inc's asset turnover of this year was 0.58900087. Toll Brothers Inc's asset turnover of last year was 0.50422158. ==> 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
=1+1+1+0+0+0+1+0+1
=5

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

Toll Brothers Inc has an F-score of 5 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 local exchange's currency.

Toll Brothers Inc Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
Question 1 1000111111
Question 2 1110100111
Question 3 0001110100
Question 4 1110100000
Question 5 1001001001
Question 6 1110110110
Question 7 1100000011
Question 8 0001111110
Question 9 0000111101
F-score 6433754655

Toll Brothers Inc Quarterly Data

Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17
Question 1 1111111111
Question 2 1111111011
Question 3 1110000101
Question 4 0100000000
Question 5 0111011010
Question 6 1110100000
Question 7 0111111111
Question 8 1111100100
Question 9 1110001111
F-score 6985545555
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