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GuruFocus has detected 5 Warning Signs with Frontline Ltd $FRO.
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Frontline Ltd (NYSE:FRO)
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

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

FRO' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 8
Current: 7

3
8

During the past 13 years, the highest Piotroski F-Score of Frontline Ltd was 8. The lowest was 3. And the median was 5.


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 (Dec16) TTM:Last Year (Dec15) TTM:
Net Income was 78.906 + 14.312 + 5.471 + 18.321 = $117.0 Mil.
Cash Flow from Operations was 121.468 + 82.346 + 48.531 + 33.67 = $286.0 Mil.
Revenue was 227.103 + 191.756 + 157.157 + 178.29 = $754.3 Mil.
Gross Profit was 148.068 + 109.434 + 74.286 + 73.516 = $405.3 Mil.
Average Total Assets from the begining of this year (Dec15)
to the end of this year (Dec16) was
(2883.468 + 2979.513 + 2948.063 + 2922.859 + 2966.317) / 5 = $2940.044 Mil.
Total Assets at the begining of this year (Dec15) was $2,883.5 Mil.
Long-Term Debt was $1,280.7 Mil.
Total Current Assets was $383.6 Mil.
Total Current Liabilities was $182.7 Mil.
Net Income was 11.038 + 23.16 + 61.868 + 58.558 = $154.6 Mil.

Revenue was 93.518 + 103.937 + 107.456 + 154.023 = $458.9 Mil.
Gross Profit was 48.738 + 51.005 + 49.083 + 92.658 = $241.5 Mil.
Average Total Assets from the begining of last year (Dec14)
to the end of last year (Dec15) was
(2501.768 + 955.876 + 872.586 + 851.154 + 2883.468) / 5 = $1612.9704 Mil.
Total Assets at the begining of last year (Dec14) was $2,501.8 Mil.
Long-Term Debt was $1,192.2 Mil.
Total Current Assets was $467.5 Mil.
Total Current Liabilities was $242.0 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.

Frontline Ltd's current net income (TTM) was 117.0. ==> 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.

Frontline Ltd's current cash flow from operations (TTM) was 286.0. ==> 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 (Dec15)
=117.01/2883.468
=0.04057961

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=154.624/2501.768
=0.06180589

Frontline Ltd's return on assets of this year was 0.04057961. Frontline Ltd's return on assets of last year was 0.06180589. ==> 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.

Frontline Ltd's current net income (TTM) was 117.0. Frontline Ltd's current cash flow from operations (TTM) was 286.0. ==> 286.0 > 117.0 ==> 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: Dec16)=Long-Term Debt/Average Total Assets from Dec15 to Dec16
=1280.687/2940.044
=0.4356013

Gearing (Last Year: Dec15)=Long-Term Debt/Average Total Assets from Dec14 to Dec15
=1192.248/1612.9704
=0.73916298

Frontline Ltd's gearing of this year was 0.4356013. Frontline Ltd's gearing of last year was 0.73916298. ==> 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: Dec16)=Total Current Assets/Total Current Liabilities
=383.626/182.749
=2.09919617

Current Ratio (Last Year: Dec15)=Total Current Assets/Total Current Liabilities
=467.465/242.037
=1.93137826

Frontline Ltd's current ratio of this year was 2.09919617. Frontline Ltd's current ratio of last year was 1.93137826. ==> 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.

Frontline Ltd's number of shares in issue this year was 169.8. Frontline Ltd's number of shares in issue last year was 156.4. ==> There is larger number of shares in issue this year. ==> Score 0.

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
=405.304/754.306
=0.5373204

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=241.484/458.934
=0.52618459

Frontline Ltd's gross margin of this year was 0.5373204. Frontline Ltd's gross margin of last year was 0.52618459. ==> 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 (Dec15)
=754.306/2883.468
=0.2615968

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Dec14)
=458.934/2501.768
=0.18344387

Frontline Ltd's asset turnover of this year was 0.2615968. Frontline Ltd's asset turnover of last year was 0.18344387. ==> 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+0+1+1+1+0+1+1
=7

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

Frontline Ltd 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.

Frontline Ltd Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111001111
Question 2 1111111111
Question 3 1101011100
Question 4 0111110011
Question 5 1010100101
Question 6 0010100011
Question 7 0001110000
Question 8 0101001111
Question 9 1101010111
F-score 5657554667

Frontline Ltd Quarterly Data

Sep14Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16
Question 1 1111111111
Question 2 1111111111
Question 3 1111101100
Question 4 1000011111
Question 5 1111100001
Question 6 0001111011
Question 7 0000000000
Question 8 1101111001
Question 9 0111011111
F-score 6657667557
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