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Costco Wholesale Corp  (NAS:COST) Piotroski F-Score: 5 (As of Today)

The zones of discrimination were as such:

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

Costco Wholesale Corp has an F-score of 5 indicating the company's financial situation is typical for a stable company.

NAS:COST' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 8
Current: 5

2
8

During the past 13 years, the highest Piotroski F-Score of Costco Wholesale Corp was 8. The lowest was 2. And the median was 6.


Historical Data

* All numbers are in millions except for per share data and ratio. All numbers are in their local exchange's currency.

* Premium members only.

Costco Wholesale Corp Annual Data

Aug09 Aug10 Aug11 Aug12 Aug13 Aug14 Aug15 Aug16 Aug17 Aug18
Piotroski F-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 7.00 6.00 7.00 6.00 7.00

Costco Wholesale Corp Quarterly Data

May14 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 May17 Aug17 Nov17 Feb18 May18 Aug18 Nov18 Feb19
Piotroski F-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 6.00 6.00 7.00 7.00 5.00

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.


Costco Wholesale Corp Distribution

* The bar in red indicates where Costco Wholesale Corp's Piotroski F-Score falls into.


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 (Feb19) TTM:Last Year (Feb18) TTM:
Net Income was 750 + 1043 + 767 + 889 = USD 3,449 Mil.
Cash Flow from Operations was 2105 + 1554 + 2177 + -219 = USD 5,617 Mil.
Revenue was 32361 + 44411 + 35069 + 35396 = USD 147,237 Mil.
Gross Profit was 4230 + 5740 + 4446 + 4676 = USD 19,092 Mil.
Average Total Assets from the begining of this year (Feb18)
to the end of this year (Feb19) was
(38703 + 39605 + 40830 + 43814 + 42799) / 5 = USD 41150.2 Mil.
Total Assets at the begining of this year (Feb18) was USD 38,703 Mil.
Long-Term Debt & Capital Lease Obligation was USD 4,794 Mil.
Total Current Assets was USD 21,648 Mil.
Total Current Liabilities was USD 22,450 Mil.
Net Income was 700 + 919 + 640 + 701 = USD 2,960 Mil.

Revenue was 28860 + 42300 + 31809 + 32995 = USD 135,964 Mil.
Gross Profit was 3890 + 5603 + 4192 + 4262 = USD 17,947 Mil.
Average Net Income from the begining of last year (Feb17)
to the end of last year (Feb18) was
(35630 + 35631 + 36347 + 39378 + 38703) / 5 = USD 37137.8 Mil.
Total Assets at the begining of last year (Feb17) was USD 35,630 Mil.
Long-Term Debt & Capital Lease Obligation was USD 6,505 Mil.
Total Current Assets was USD 18,899 Mil.
Total Current Liabilities was USD 18,913 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.

Costco Wholesale Corp's current Net Income (TTM) was 3,449. ==> 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.

Costco Wholesale Corp's current Cash Flow from Operations (TTM) was 5,617. ==> 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/Total Assets(Feb18)
=3449/38703
=0.08911454

ROA (Last Year)=Net Income/Total Assets(Feb17)
=2960/35630
=0.08307606

Costco Wholesale Corp's return on assets of this year was 0.08911454. Costco Wholesale Corp's return on assets of last year was 0.08307606. ==> 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.

Costco Wholesale Corp's current Net Income (TTM) was 3,449. Costco Wholesale Corp's current Cash Flow from Operations (TTM) was 5,617. ==> 5,617 > 3,449 ==> 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: Feb19)=Long-Term Debt & Capital Lease Obligation/Total Assetsfrom Feb18 to Feb19
=4794/41150.2
=0.11650004

Gearing (Last Year: Feb18)=Long-Term Debt & Capital Lease Obligation/Total Assetsfrom Feb17 to Feb18
=6505/37137.8
=0.17515846

Costco Wholesale Corp's gearing of this year was 0.11650004. Costco Wholesale Corp's gearing of last year was 0.17515846. ==> 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: Feb19)=Total Current Assets/Total Current Liabilities
=21648/22450
=0.96427617

Current Ratio (Last Year: Feb18)=Total Current Assets/Total Current Liabilities
=18899/18913
=0.99925977

Costco Wholesale Corp's current ratio of this year was 0.96427617. Costco Wholesale Corp's current ratio of last year was 0.99925977. ==> 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.

Costco Wholesale Corp's number of shares in issue this year was 442.3. Costco Wholesale Corp's number of shares in issue last year was 441.6. ==> 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
=19092/147237
=0.12966849

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=17947/135964
=0.13199818

Costco Wholesale Corp's gross margin of this year was 0.12966849. Costco Wholesale Corp's gross margin of last year was 0.13199818. ==> 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/Total Assets at the Beginning of This Year (Feb18)
=147237/38703
=3.80427874

Asset Turnover (Last Year)=Revenue/Total Assets at the Beginning of Last Year (Feb17)
=135964/35630
=3.81599775

Costco Wholesale Corp's asset turnover of this year was 3.80427874. Costco Wholesale Corp's asset turnover of last year was 3.81599775. ==> 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+1+1+1+0+0+0+0
=5

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

Costco Wholesale Corp has an F-score of 5 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.


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