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Berkshire Hathaway Piotroski F-Score

: 4 (As of Today)
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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

Berkshire Hathaway has an F-score of 4 indicating the company's financial situation is typical for a stable company.

NYSE:BRK.B' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Med: 6   Max: 9
Current: 4

3
9

During the past 13 years, the highest Piotroski F-Score of Berkshire Hathaway was 9. The lowest was 3. And the median was 6.

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 (Jun20) TTM:Last Year (Jun19) TTM:
Net Income was 16524 + 29159 + -49746 + 26295 = USD22,232 Mil.
Cash Flow from Operations was 9848 + 12077 + 6798 + 10668 = USD39,391 Mil.
Revenue was 75898 + 96679 + -9010 + 96925 = USD260,492 Mil.
Average Total Assets from the begining of this year (Jun19)
to the end of this year (Jun20) was
(760108 + 788482 + 817729 + 760448 + 788133) / 5 = USD782980 Mil.
Total Assets at the begining of this year (Jun19) was USD760,108 Mil.
Long-Term Debt & Capital Lease Obligation was USD103,531 Mil.
Total Assets was USD788,133 Mil.
Total Liabilities was USD390,880 Mil.
Net Income was 18540 + -25392 + 21661 + 14073 = USD28,882 Mil.

Revenue was 78156 + 28206 + 81000 + 73646 = USD261,008 Mil.
Average Total Assets from the begining of last year (Jun18)
to the end of last year (Jun19) was
(711932 + 736459 + 707794 + 738724 + 760108) / 5 = USD731003.4 Mil.
Total Assets at the begining of last year (Jun18) was USD711,932 Mil.
Long-Term Debt & Capital Lease Obligation was USD95,646 Mil.
Total Assets was USD760,108 Mil.
Total Liabilities was USD373,717 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.

Berkshire Hathaway's current Net Income (TTM) was 22,232. ==> 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.

Berkshire Hathaway's current Cash Flow from Operations (TTM) was 39,391. ==> 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 (Jun19)
=22232/760108
=0.02924848

ROA (Last Year)=Net Income/Total Assets (Jun18)
=28882/711932
=0.04056848

Berkshire Hathaway's return on assets of this year was 0.02924848. Berkshire Hathaway's return on assets of last year was 0.04056848. ==> 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.

Berkshire Hathaway's current Net Income (TTM) was 22,232. Berkshire Hathaway's current Cash Flow from Operations (TTM) was 39,391. ==> 39,391 > 22,232 ==> 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: Jun20)=Long-Term Debt & Capital Lease Obligation/Average Total Assets from Jun19 to Jun20
=103531/782980
=0.13222688

Gearing (Last Year: Jun19)=Long-Term Debt & Capital Lease Obligation/Average Total Assets from Jun18 to Jun19
=95646/731003.4
=0.13084207

Berkshire Hathaway's gearing of this year was 0.13222688. Berkshire Hathaway's gearing of last year was 0.13084207. ==> Last year is lower than this year ==> Score 0.

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

* Note that for banks and insurance companies, there's no Total Current Assets and Total Current Liabilities reported. Thus, we use Total Assets and Total Liabilities to calculate current ratio for banks and insurance companies.

Current Ratio (This Year: Jun20)=Total Assets/Total Liabilities
=788133/390880
=2.01630424

Current Ratio (Last Year: Jun19)=Total Assets/Total Liabilities
=760108/373717
=2.03391336

Berkshire Hathaway's current ratio of this year was 2.01630424. Berkshire Hathaway's current ratio of last year was 2.03391336. ==> 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.

Berkshire Hathaway's number of shares in issue this year was 2417.639. Berkshire Hathaway's number of shares in issue last year was 2452.442. ==> 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.

* Note that for banks and insurance companies, there's no Gross Profit reported. Thus, we use net income instead of gross profit and calculate Net Margin for this score.

Net Margin (This Year: TTM)=Net Income/Revenue
=22232/260492
=0.08534619

Net Margin (Last Year: TTM)=Net Income/Revenue
=28882/261008
=0.11065561

Berkshire Hathaway's net margin of this year was 0.08534619. Berkshire Hathaway's net margin of last year was 0.11065561. ==> Last year's net 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 (Jun19)
=260492/760108
=0.34270393

Asset Turnover (Last Year)=Revenue/Total Assets at the Beginning of Last Year (Jun18)
=261008/711932
=0.36661928

Berkshire Hathaway's asset turnover of this year was 0.34270393. Berkshire Hathaway's asset turnover of last year was 0.36661928. ==> 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+0+0+1+0+0
=4

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

Berkshire Hathaway has an F-score of 4 indicating the company's financial situation is typical for a stable company.

Berkshire Hathaway  (NYSE:BRK.B) 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.


Berkshire Hathaway Piotroski F-Score Related Terms

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