Market Cap : 9.5 B | Enterprise Value : 4.58 B | PE Ratio : 10.84 | PB Ratio : 1.26 |
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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
First Horizon has an F-score of 5 indicating the company's financial situation is typical for a stable company.
During the past 13 years, the highest Piotroski F-Score of First Horizon was 8. The lowest was 3. And the median was 5.
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 (Dec20) TTM: | Last Year (Dec19) TTM: |
Net Income was 13.62 + 53.814 + 536.061 + 241.505 = $845 Mil. Cash Flow from Operations was -1400.005 + 897.05 + 230.058 + 444.897 = $172 Mil. Revenue was 465.866 + 499.959 + 1339.654 + 792.521 = $3,098 Mil. Average Total Assets from the begining of this year (Dec19) to the end of this year (Dec20) was (43311 + 47197.378 + 48644.659 + 83029.579 + 84209) / 5 = $61278.3232 Mil. Total Assets at the begining of this year (Dec19) was $43,311 Mil. Long-Term Debt & Capital Lease Obligation was $1,624 Mil. Total Assets was $84,209 Mil. Total Liabilities was $75,902 Mil. |
Net Income was 100.585 + 110.89 + 111.06 + 118.465 = $441 Mil. Revenue was 424.066 + 449.89 + 460.777 + 483.268 = $1,818 Mil. Average Total Assets from the begining of last year (Dec18) to the end of last year (Dec19) was (40832.258 + 41099.003 + 42171.77 + 43717.684 + 43311) / 5 = $42226.343 Mil. Total Assets at the begining of last year (Dec18) was $40,832 Mil. Long-Term Debt & Capital Lease Obligation was $745 Mil. Total Assets was $43,311 Mil. Total Liabilities was $38,235 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.
First Horizon's current Net Income (TTM) was 845.
==> 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.
First Horizon's current Cash Flow from Operations (TTM) was 172.
==> 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 (Dec19) |
= | 845 | / | 43311 | |
= | 0.01951006 |
ROA (Last Year) | = | Net Income | / | Total Assets (Dec18) |
= | 441 | / | 40832.258 | |
= | 0.01080028 |
First Horizon's return on assets of this year was 0.01951006. First Horizon's return on assets of last year was 0.01080028.
==> 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.
First Horizon's current Net Income (TTM) was 845. First Horizon's current Cash Flow from Operations (TTM) was 172.
==> 172 <= 845 ==> CFROA <= ROA ==> Score 0.
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: Dec20) | = | Long-Term Debt & Capital Lease Obligation | / | Average Total Assets from Dec19 to Dec20 |
= | 1624 | / | 61278.3232 | |
= | 0.02650203 |
Gearing (Last Year: Dec19) | = | Long-Term Debt & Capital Lease Obligation | / | Average Total Assets from Dec18 to Dec19 |
= | 745 | / | 42226.343 | |
= | 0.01764301 |
First Horizon's gearing of this year was 0.02650203. First Horizon's gearing of last year was 0.01764301.
==> 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: Dec20) | = | Total Assets | / | Total Liabilities |
= | 84209 | / | 75902 | |
= | 1.10944376 |
Current Ratio (Last Year: Dec19) | = | Total Assets | / | Total Liabilities |
= | 43311 | / | 38235 | |
= | 1.13275794 |
First Horizon's current ratio of this year was 1.10944376. First Horizon's current ratio of last year was 1.13275794.
==> 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.
First Horizon's number of shares in issue this year was 557.677. First Horizon's number of shares in issue last year was 313.425.
==> 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.
* 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 |
= | 845 | / | 3098 | |
= | 0.27275662 |
Net Margin (Last Year: TTM) | = | Net Income | / | Revenue |
= | 441 | / | 1818.001 | |
= | 0.24257412 |
First Horizon's net margin of this year was 0.27275662. First Horizon's net margin of last year was 0.24257412.
==> This year's net 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 (Dec19) |
= | 3098 | / | 43311 | |
= | 0.07152917 |
Asset Turnover (Last Year) | = | Revenue | / | Total Assets at the Beginning of Last Year (Dec18) |
= | 1818.001 | / | 40832.258 | |
= | 0.04452365 |
First Horizon's asset turnover of this year was 0.07152917. First Horizon's asset turnover of last year was 0.04452365.
==> 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 | + | 1 | + | 0 | + | 0 | + | 0 | + | 0 | + | 1 | + | 1 | |
= | 5 |
Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3
First Horizon has an F-score of 5 indicating the company's financial situation is typical for a stable company.
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.