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Nexeo Solutions Piotroski F-Score

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The zones of discrimination were as such:

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

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


Nexeo Solutions Piotroski F-Score 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.

Nexeo Solutions Annual Data
Dec14 Dec15 Sep16 Sep17 Sep18
Piotroski F-Score N/A N/A 5.00 6.00 9.00

Nexeo Solutions Quarterly Data
Mar14 Jun14 Sep14 Dec14 Mar15 Jun15 Sep15 Dec15 Mar16 Jun16 Sep16 Dec16 Mar17 Jun17 Sep17 Dec17 Mar18 Jun18 Sep18 Dec18
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 8.00 9.00 7.00

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 (Dec18) TTM:Last Year (Dec17) TTM:
Net Income was 0.4 + 17.5 + -15 + 16.2 = $19 Mil.
Cash Flow from Operations was 34.2 + 32.8 + 80.9 + -50.2 = $98 Mil.
Revenue was 1041 + 1046.4 + 1017.2 + 935.8 = $4,040 Mil.
Gross Profit was 115.7 + 120.2 + 117.3 + 98.7 = $452 Mil.
Average Total Assets from the begining of this year (Dec17)
to the end of this year (Dec18) was
(2244.5 + 2317.9 + 2278.7 + 2243.6 + 2179.1) / 5 = $2252.76 Mil.
Total Assets at the begining of this year (Dec17) was $2,245 Mil.
Long-Term Debt & Capital Lease Obligation was $805 Mil.
Total Current Assets was $988 Mil.
Total Current Liabilities was $413 Mil.
Net Income was -1.1 + 10.2 + 13.6 + 26.5 = $49 Mil.

Revenue was 917.7 + 942.7 + 981.7 + 929.6 = $3,772 Mil.
Gross Profit was 102.2 + 102.7 + 109.1 + 106.9 = $421 Mil.
Average Net Income from the begining of last year (Dec16)
to the end of last year (Dec17) was
(2030.4 + 2207.9 + 2236.9 + 2253.5 + 2244.5) / 5 = $2194.64 Mil.
Total Assets at the begining of last year (Dec16) was $2,030 Mil.
Long-Term Debt & Capital Lease Obligation was $853 Mil.
Total Current Assets was $995 Mil.
Total Current Liabilities was $431 Mil.

*Note: If the latest quarterly/semi-annual/annual total assets data is 0, then we will use previous quarterly/semi-annual/annual data for all the items in the balance sheet.

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.

Nexeo Solutions's current Net Income (TTM) was 19. ==> 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.

Nexeo Solutions's current Cash Flow from Operations (TTM) was 98. ==> 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 (Dec17)
=19.1/2244.5
=0.00850969

ROA (Last Year)=Net Income/Total Assets (Dec16)
=49.2/2030.4
=0.02423168

Nexeo Solutions's return on assets of this year was 0.00850969. Nexeo Solutions's return on assets of last year was 0.02423168. ==> 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.

Nexeo Solutions's current Net Income (TTM) was 19. Nexeo Solutions's current Cash Flow from Operations (TTM) was 98. ==> 98 > 19 ==> 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: Dec18)=Long-Term Debt & Capital Lease Obligation/Average Total Assets from Dec17 to Dec18
=805.1/2252.76
=0.35738383

Gearing (Last Year: Dec17)=Long-Term Debt & Capital Lease Obligation/Average Total Assets from Dec16 to Dec17
=852.6/2194.64
=0.38849196

Nexeo Solutions's gearing of this year was 0.35738383. Nexeo Solutions's gearing of last year was 0.38849196. ==> 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: Dec18)=Total Current Assets/Total Current Liabilities
=987.9/413.4
=2.38969521

Current Ratio (Last Year: Dec17)=Total Current Assets/Total Current Liabilities
=995.1/430.8
=2.30988858

Nexeo Solutions's current ratio of this year was 2.38969521. Nexeo Solutions's current ratio of last year was 2.30988858. ==> 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.

Nexeo Solutions's number of shares in issue this year was 77.094. Nexeo Solutions's number of shares in issue last year was 77.139. ==> 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
=451.9/4040.4
=0.11184536

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=420.9/3771.7
=0.11159424

Nexeo Solutions's gross margin of this year was 0.11184536. Nexeo Solutions's gross margin of last year was 0.11159424. ==> 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/Total Assets at the Beginning of This Year (Dec17)
=4040.4/2244.5
=1.80013366

Asset Turnover (Last Year)=Revenue/Total Assets at the Beginning of Last Year (Dec16)
=3771.7/2030.4
=1.85761426

Nexeo Solutions's asset turnover of this year was 1.80013366. Nexeo Solutions's asset turnover of last year was 1.85761426. ==> 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+0+1+1+1+1+1+0
=7

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

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

Nexeo Solutions  (NAS:NXEO) Piotroski F-Score 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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