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Varian Medical Systems Inc (NYSE:VAR)
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

Varian Medical Systems Inc has an F-score of 7. It is a good or high score, which usually indicates a very healthy situation.

VAR' s Piotroski F-Score Range Over the Past 10 Years
Min: 4   Max: 9
Current: 7

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 (Dec15) TTM:Last Year (Dec14) TTM:
Net Income was 105.969 + 113.506 + 98.696 + 89.027 = $407 Mil.
Cash Flow from Operations was 53.314 + 183.901 + 153.389 + 77.222 = $468 Mil.
Revenue was 759.406 + 784.011 + 817.84 + 757.133 = $3,118 Mil.
Gross Profit was 322.538 + 314.976 + 318.17 + 309.692 = $1,265 Mil.
Average Total Assets from the begining of this year (Dec14)
to the end of this year (Dec15) was
(3396.302 + 3459.536 + 3531.579 + 3600.748 + 3726.662) / 5 = $3542.9654 Mil.
Total Assets at the begining of this year (Dec14) was $3,396 Mil.
Long-Term Debt was $345 Mil.
Total Current Assets was $2,640 Mil.
Total Current Liabilities was $1,589 Mil.
Net Income was 92.788 + 107.09 + 105.865 + 93.314 = $399 Mil.

Revenue was 778.506 + 747.685 + 812.107 + 737.854 = $3,076 Mil.
Gross Profit was 328.31 + 323.727 + 340.059 + 327.008 = $1,319 Mil.
Average Total Assets from the begining of last year (Dec13)
to the end of last year (Dec14) was
(3391.234 + 3475.838 + 3474.875 + 3357.29 + 3396.302) / 5 = $3419.1078 Mil.
Total Assets at the begining of last year (Dec13) was $3,391 Mil.
Long-Term Debt was $375 Mil.
Total Current Assets was $2,552 Mil.
Total Current Liabilities was $1,257 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.

Varian Medical Systems Inc's current net income (TTM) was 407. ==> 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.

Varian Medical Systems Inc's current cash flow from operations (TTM) was 468. ==> 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 (Dec14)
=407.198/3396.302
=0.11989452

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec13)
=399.057/3391.234
=0.11767309

Varian Medical Systems Inc's return on assets of this year was 0.11989452. Varian Medical Systems Inc's return on assets of last year was 0.11767309. ==> 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.

Varian Medical Systems Inc's current net income (TTM) was 407. Varian Medical Systems Inc's current cash flow from operations (TTM) was 468. ==> 468 > 407 ==> 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: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=345/3542.9654
=0.09737606

Gearing (Last Year: Dec14)=Long-Term Debt/Average Total Assets from Dec13 to Dec14
=375/3419.1078
=0.10967774

Varian Medical Systems Inc's gearing of this year was 0.09737606. Varian Medical Systems Inc's gearing of last year was 0.10967774. ==> 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: Dec15)=Total Current Assets/Total Current Liabilities
=2640.216/1589.055
=1.6615007

Current Ratio (Last Year: Dec14)=Total Current Assets/Total Current Liabilities
=2552.365/1256.93
=2.03063416

Varian Medical Systems Inc's current ratio of this year was 1.6615007. Varian Medical Systems Inc's current ratio of last year was 2.03063416. ==> 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.

Varian Medical Systems Inc's number of shares in issue this year was 97.8. Varian Medical Systems Inc's number of shares in issue last year was 101.6. ==> 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
=1265.376/3118.39
=0.40577862

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1319.104/3076.152
=0.42881626

Varian Medical Systems Inc's gross margin of this year was 0.40577862. Varian Medical Systems Inc's gross margin of last year was 0.42881626. ==> 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 (Dec14)
=3118.39/3396.302
=0.91817218

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec13)
=3076.152/3391.234
=0.90708928

Varian Medical Systems Inc's asset turnover of this year was 0.91817218. Varian Medical Systems Inc's asset turnover of last year was 0.90708928. ==> 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+1+1+0+1+0+1
=7

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

Varian Medical Systems Inc 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 own currency.

Varian Medical Systems Inc Annual Data

Sep06Sep07Sep08Sep09Sep10Sep11Sep12Sep13Sep14Sep15
Question 1 1111111111
Question 2 1111111111
Question 3 1010010001
Question 4 0110111111
Question 5 1111111011
Question 6 0011001100
Question 7 1111111111
Question 8 0111110010
Question 9 1010011001
F-score 6696687567

Varian Medical Systems Inc Quarterly Data

Dec13Mar14Jun14Sep14Dec14Mar15Jun15Sep15Dec15Mar16
Question 1 1111111111
Question 2 1111111111
Question 3 0000000110
Question 4 0101101111
Question 5 0001111111
Question 6 1110000000
Question 7 1111111111
Question 8 1111110000
Question 9 0000000111
F-score 5656655776
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