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GuruFocus has detected 5 Warning Signs with The Valspar Corp $VAL.
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The Valspar Corp (NYSE:VAL)
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 = 7, 8, 9
Bad or low score = 0, 1, 2, 3

The Valspar Corp has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.

VAL' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 8
Current: 7

4
8

During the past 13 years, the highest Piotroski F-Score of The Valspar Corp was 8. The lowest was 4. 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 (Oct16) TTM:Last Year (Oct15) TTM:
Net Income was 52.431 + 80.027 + 116.988 + 103.594 = $353 Mil.
Cash Flow from Operations was 20.489 + 16.486 + 213.428 + 232.309 = $483 Mil.
Revenue was 885.756 + 1056.797 + 1141.942 + 1106.057 = $4,191 Mil.
Gross Profit was 318.627 + 401.441 + 421.947 + 393.569 = $1,536 Mil.
Average Total Assets from the begining of this year (Oct15)
to the end of this year (Oct16) was
(4318.575 + 4175.241 + 4346.471 + 4390.081 + 4314.55) / 5 = $4308.9836 Mil.
Total Assets at the begining of this year (Oct15) was $4,319 Mil.
Long-Term Debt was $1,557 Mil.
Total Current Assets was $1,596 Mil.
Total Current Liabilities was $1,266 Mil.
Net Income was 103.974 + 90.314 + 102.862 + 102.356 = $400 Mil.

Revenue was 1014.669 + 1079.289 + 1149.126 + 1149.538 = $4,393 Mil.
Gross Profit was 333.292 + 393.203 + 411.283 + 413.611 = $1,551 Mil.
Average Total Assets from the begining of last year (Oct14)
to the end of last year (Oct15) was
(4033.951 + 4006.861 + 3978.86 + 4578.018 + 4318.575) / 5 = $4183.253 Mil.
Total Assets at the begining of last year (Oct14) was $4,034 Mil.
Long-Term Debt was $1,707 Mil.
Total Current Assets was $1,631 Mil.
Total Current Liabilities was $1,367 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.

The Valspar Corp's current net income (TTM) was 353. ==> 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.

The Valspar Corp's current cash flow from operations (TTM) was 483. ==> 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 (Oct15)
=353.04/4318.575
=0.08174919

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Oct14)
=399.506/4033.951
=0.09903591

The Valspar Corp's return on assets of this year was 0.08174919. The Valspar Corp's return on assets of last year was 0.09903591. ==> 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.

The Valspar Corp's current net income (TTM) was 353. The Valspar Corp's current cash flow from operations (TTM) was 483. ==> 483 > 353 ==> 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
=1556.952/4308.9836
=0.36132697

Gearing (Last Year: Oct15)=Long-Term Debt/Average Total Assets from Oct14 to Oct15
=1706.933/4183.253
=0.40803963

The Valspar Corp's gearing of this year was 0.36132697. The Valspar Corp's gearing of last year was 0.40803963. ==> This year is lower or equal to last year. ==> Score 1.

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
=1596.285/1265.82
=1.26106792

Current Ratio (Last Year: Oct15)=Total Current Assets/Total Current Liabilities
=1631.23/1366.739
=1.19351976

The Valspar Corp's current ratio of this year was 1.26106792. The Valspar Corp's current ratio of last year was 1.19351976. ==> This year's current ratio is higher. ==> Score 1.

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.

The Valspar Corp's number of shares in issue this year was 81. The Valspar Corp's number of shares in issue last year was 82.4. ==> 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
=1535.584/4190.552
=0.36643955

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1551.389/4392.622
=0.35318063

The Valspar Corp's gross margin of this year was 0.36643955. The Valspar Corp's gross margin of last year was 0.35318063. ==> This year's gross margin is higher. ==> Score 1.

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)
=4190.552/4318.575
=0.97035527

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Oct14)
=4392.622/4033.951
=1.08891308

The Valspar Corp's asset turnover of this year was 0.97035527. The Valspar Corp's asset turnover of last year was 1.08891308. ==> 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+1+1+1+1+0
=7

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

The Valspar Corp has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.


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.

The Valspar Corp Annual Data

Oct07Oct08Oct09Oct10Oct11Oct12Oct13Oct14Oct15Oct16
Question 1 1111011111
Question 2 1111111111
Question 3 0011010110
Question 4 1111111101
Question 5 0000101101
Question 6 1110010011
Question 7 1101101111
Question 8 0010010111
Question 9 0001111000
F-score 5566576767

The Valspar Corp Quarterly Data

Jul14Oct14Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16
Question 1 1111111111
Question 2 1111111111
Question 3 0111110000
Question 4 1100001111
Question 5 1100000011
Question 6 0011111111
Question 7 1111111111
Question 8 0111111111
Question 9 1000000000
F-score 6766666677
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