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Varian Medical Systems Inc (NYSE:VAR)
Piotroski F-Score
6 (As of Today)

The zones of discrimination were as such:

Good or high score = 8 or 9
Bad or low score = 0 or 1

Varian Medical Systems Inc has an F-score of 6 indicating the company's financial situation is typical for a stable company.

VAR' s 10-Year Piotroski F-Score Range
Min: 4   Max: 9
Current: 6

4
9

During the past 13 years, the highest Piotroski F-Score of Varian Medical Systems Inc was 9. The lowest was 4. And the median was 7.


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 own currency.

This Year (Mar14) TTM:Last Year (Mar13) TTM:
Net Income was 92.788 + 97.96 + 117.346 + 112.831 = $421 Mil.
Cash Flow from Operations was 125.852 + 43.261 + 154.929 + 197.74 = $522 Mil.
Revenue was 778.506 + 711.502 + 769.93 + 726.211 = $2,986 Mil.
Gross Profit was 328.31 + 309.579 + 328.496 + 310.465 = $1,277 Mil.
Total Assets at the begining of this year (Mar13) was $3,062 Mil.
Total Assets was $3,476 Mil.
Long-Term Debt was $413 Mil.
Total Current Assets was $2,678 Mil.
Total Current Liabilities was $1,235 Mil.
Net Income was 112.788 + 95.283 + 120.201 + 108.843 = $437 Mil.

Revenue was 768.358 + 678.398 + 756.157 + 705.246 = $2,908 Mil.
Gross Profit was 319.638 + 291.088 + 323.27 + 307.611 = $1,242 Mil.
Total Assets at the begining of last year (Mar12) was $2,663 Mil.
Total Assets was $3,062 Mil.
Long-Term Debt was $6 Mil.
Total Current Assets was $2,326 Mil.
Total Current Liabilities was $1,289 Mil.

Profitability

Q1. 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.

Varian Medical Systems Inc's current net income was 421. ==> Positive ==> Score 1.

Q2. 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.

Varian Medical Systems Inc's current cash flow from operations was 522. ==> Positive ==> Score 1.

Q3. 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/Total Assets at the beginning of this year (Mar13)
=420.925/3062.079
=0.1374638

ROA (Last Year)=Net Income/Total Assets at the beginning of last year (Mar12)
=437.115/2663.17
=0.16413334

Varian Medical Systems Inc's return on assets of this year was 0.1374638. Varian Medical Systems Inc's return on assets of last year was 0.16413334. ==> Last year is higher ==> Score 0.

Q4. 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.

Varian Medical Systems Inc's current net income was 421. Varian Medical Systems Inc's current cash flow from operations was 522. ==> 522 > 421 ==> CFROA > ROA ==> Score 1.

Funding

Q5. 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)=Long-Term Debt/Total Assets
=412.5/3475.838
=0.11867642

Gearing (Last Year)=Long-Term Debt/Total Assets
=6.25/3062.079
=0.0020411

Varian Medical Systems Inc's gearing of this year was 0.11867642. Varian Medical Systems Inc's gearing of last year was 0.0020411. ==> Last year is lower than this year ==> Score 0.

Q6. 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)=Total Current Assets/Total Current Liabilities
=2678.304/1234.736
=2.16913089

Current Ratio (Last Year)=Total Current Assets/Total Current Liabilities
=2326.354/1288.999
=1.80477564

Varian Medical Systems Inc's current ratio of this year was 2.16913089. Varian Medical Systems Inc's current ratio of last year was 1.80477564. ==> This year's current ratio is higher. ==> Score 1.

Q7. 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.

Varian Medical Systems Inc's number of shares in issue this year was 105.4. Varian Medical Systems Inc's number of shares in issue last year was 110.7. ==> There is smaller number of shares in issue this year, or the same. ==> Score 1.

Efficiency

Q8. 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)=Gross Profit/Revenue
=1276.85/2986.149
=0.42759085

Gross Margin (Last Year)=Gross Profit/Revenue
=1241.607/2908.159
=0.42693917

Varian Medical Systems Inc's gross margin of this year was 0.42759085. Varian Medical Systems Inc's gross margin of last year was 0.42693917. ==> This year's gross margin is higher. ==> Score 1.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales 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/Total Assets at the beginning of this year (Mar13)
=2986.149/3062.079
=0.97520312

Asset Turnover (Last Year)=Revenue/Total Assets at the beginning of last year (Mar12)
=2908.159/2663.17
=1.0919915

Varian Medical Systems Inc's asset turnover of this year was 0.97520312. Varian Medical Systems Inc's asset turnover of last year was 1.0919915. ==> Last year's asset turnover is higher ==> Score 0.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+0+1+0+1+1+1+0
=6

Good or high score = 8 or 9

Bad or low score = 0 or 1

Varian Medical Systems Inc has an F-score of 6 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 own currency.

Varian Medical Systems Inc Annual Data

Sep04Sep05Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13
Q1 1111111111
Q2 1111111111
Q3 1110100100
Q4 1101101111
Q5 1111111110
Q6 0000110011
Q7 0111111111
Q8 1101111100
Q9 1010100110
F-score 7766966875

Varian Medical Systems Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 1111111111
Q2 1111111111
Q3 0001110000
Q4 1111011010
Q5 1111110000
Q6 1011111111
Q7 1111111111
Q8 0000110111
Q9 1111000000
F-score 7678785565
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