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Watsco Inc (NYSE:WSO)
Piotroski F-Score
8 (As of Today)

Good Sign:

Piotroski F-Score of 8 is 8, indicating very healthy situation.

The zones of discrimination were as such:

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

Watsco Inc has an F-score of 8. It is a good or high score, which usually indicates a very healthy situation.

WSO' s 10-Year Piotroski F-Score Range
Min: 3   Max: 9
Current: 8

3
9

During the past 13 years, the highest Piotroski F-Score of Watsco Inc was 9. The lowest was 3. 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 own currency.

This Year (Jun14) TTM:Last Year (Jun13) TTM:
Net Income was 45.699 + 17.321 + 16.753 + 56.101 = $136 Mil.
Cash Flow from Operations was 128.09 + 99.086 + 24.901 + -90.059 = $162 Mil.
Revenue was 1081.893 + 827.352 + 762.568 + 1170.186 = $3,842 Mil.
Gross Profit was 258.597 + 198.53 + 188.069 + 279.273 = $924 Mil.
Average Total Assets from the begining of this year (Jun13)
to the end of this year (Jun14) was
(1913.009 + 1818.033 + 1669.531 + 1776.856 + 1990.839) / 5 = $1,834 Mil.
Total Assets was $1,991 Mil.
Long-Term Debt was $349 Mil.
Total Current Assets was $1,346 Mil.
Total Current Liabilities was $386 Mil.
Net Income was 41.005 + 14.759 + 13.385 + 51.318 = $120 Mil.

Revenue was 1020.859 + 765.54 + 713.633 + 1120.452 = $3,620 Mil.
Gross Profit was 242.505 + 182.793 + 175.446 + 266.68 = $867 Mil.
Average Total Assets from the begining of last year (Jun12)
to the end of last year (Jun13) was
(1894.875 + 1799.817 + 1682.055 + 1727.283 + 1913.009) / 5 = $1,803 Mil.
Total Assets was $1,913 Mil.
Long-Term Debt was $398 Mil.
Total Current Assets was $1,261 Mil.
Total Current Liabilities was $362 Mil.

Profitability

Q1. Return on Assets (ROA)

Net income before extraordinary items for the year divided by average total assets throughout the year.

Score 1 if positive, 0 if negative.

Watsco Inc's current net income (ttm) was 136. ==> Positive ==> Score 1.

Q2. Cash Flow Return on Assets (CFROA)

Net cash flow from operating activities (operating cash flow) divided by average total assets throughout the year.

Score 1 if positive, 0 if negative.

Watsco Inc's current cash flow from operations (ttm) was 162. ==> 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 (TTM)/Average Total Assets from Jun13 to Jun14
=135.874/1833.6536
=0.07410015

ROA (Last Year)=Net Income (TTM)/Average Total Assets from Jun12 to Jun13
=120.467/1803.4078
=0.06679964

Watsco Inc's return on assets of this year was 0.07410015. Watsco Inc's return on assets of last year was 0.06679964. ==> This year is higher. ==> Score 1.

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.

Watsco Inc's current net income (ttm) was 136. Watsco Inc's current cash flow from operations (ttm) was 162. ==> 162 > 136 ==> CFROA > ROA ==> Score 1.

Funding

Q5. Change in Gearing or Leverage

Compare this year’s gearing (long-term debt divided by total assets) to last year’s gearing.

Score 0 if this year's gearing is higher, 1 otherwise.

Gearing (This Year: Jun14)=Long-Term Debt/Total Assets
=348.787/1990.839
=0.17519599

Gearing (Last Year: Jun13)=Long-Term Debt/Total Assets
=398.276/1913.009
=0.20819348

Watsco Inc's gearing of this year was 0.17519599. Watsco Inc's gearing of last year was 0.20819348. ==> This year is lower or equal to last year. ==> Score 1.

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: Jun14)=Total Current Assets/Total Current Liabilities
=1346.218/385.652
=3.49075851

Current Ratio (Last Year: Jun13)=Total Current Assets/Total Current Liabilities
=1260.984/361.777
=3.48552838

Watsco Inc's current ratio of this year was 3.49075851. Watsco Inc's current ratio of last year was 3.48552838. ==> 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.

Watsco Inc's number of shares in issue this year was 32.4. Watsco Inc's number of shares in issue last year was 32.2. ==> There is larger number of shares in issue this year. ==> Score 0.

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: TTM)=Gross Profit/Revenue
=924.469/3841.999
=0.24062187

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=867.424/3620.484
=0.23958786

Watsco Inc's gross margin of this year was 0.24062187. Watsco Inc's gross margin of last year was 0.23958786. ==> This year's gross margin is higher. ==> Score 1.

Q9. Change in asset turnover

Compare this year’s asset turnover (total sales for the year divided by average total assets throughout 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)/Average Total Assets from Jun13 to Jun14
=3841.999/1833.6536
=2.09526979

Asset Turnover (Last Year)=Revenue (TTM)/Average Total Assets from Jun12 to Jun13
=3620.484/1803.4078
=2.00757921

Watsco Inc's asset turnover of this year was 2.09526979. Watsco Inc's asset turnover of last year was 2.00757921. ==> This year's asset turnover is higher. ==> Score 1.

Evaluation

Piotroski F-Score=Q1+Q2+Q3+Q4+Q5+Q6+Q7+Q8+Q9
=1+1+1+1+1+1+0+1+1
=8

Good or high score = 8 or 9

Bad or low score = 0 or 1

Watsco Inc has an F-score of 8. 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, Altman Z-Score, Beneish M-Score


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their own currency.

Watsco Inc Annual Data

Dec04Dec05Dec06Dec07Dec08Dec09Dec10Dec11Dec12Dec13
Q1 1111111111
Q2 1111111111
Q3 1110001111
Q4 1001111011
Q5 1110111101
Q6 0011100101
Q7 0001100000
Q8 1010100101
Q9 0100011111
F-score 6565756758

Watsco Inc Quarterly Data

Mar12Jun12Sep12Dec12Mar13Jun13Sep13Dec13Mar14Jun14
Q1 1111111111
Q2 1111111111
Q3 1010011111
Q4 1011111111
Q5 1000000111
Q6 1110111101
Q7 0000000000
Q8 1000001111
Q9 1100000011
F-score 8453456778
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