Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3
Wells Fargo has an F-score of 5 indicating the company's financial situation is typical for a stable company.
NYSE:WFC'
s Piotroski F-Score Range Over the Past 10 Years
Min: 1 Med: 5 Max: 8
Current: 5
1
-
8
During the past 13 years, the highest Piotroski F-Score of Wells Fargo was 8. The lowest was 1. 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 653 + -2379 + 2035 + 2992 = $3,301 Mil. Cash Flow from Operations was 17273 + 16119 + -8576 + 0 = $24,816 Mil. Revenue was 17717 + 17836 + 18862 + 17925 = $72,340 Mil.
Average Total Assets from the begining of this year (Dec19)
to the end of this year (Dec20) was
(1927555 + 1981349 + 1968766 + 1922220 + 1955163) / 5 = $1951010.6 Mil. Total Assets at the begining of this year (Dec19) was $1,927,555 Mil. Long-Term Debt & Capital Lease Obligation was $212,950 Mil. Total Assets was $1,955,163 Mil. Total Liabilities was $1,769,243 Mil.
Net Income was 5860 + 6206 + 4610 + 2873 = $19,549 Mil.
Revenue was 21609 + 21584 + 22010 + 19860 = $85,063 Mil.
Average Total Assets from the begining of last year (Dec18)
to the end of last year (Dec19) was
(1895883 + 1887792 + 1923388 + 1943950 + 1927555) / 5 = $1915713.6 Mil. Total Assets at the begining of last year (Dec18) was $1,895,883 Mil. Long-Term Debt & Capital Lease Obligation was $228,191 Mil. Total Assets was $1,927,555 Mil. Total Liabilities was $1,739,571 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.
Wells Fargo's current Net Income (TTM) was 3,301.
==> 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.
Wells Fargo's return on assets of this year was 0.00171253. Wells Fargo's return on assets of last year was 0.01031129.
==> 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.
Wells Fargo's current Net Income (TTM) was 3,301. Wells Fargo's current Cash Flow from Operations (TTM) was 24,816.
==> 24,816 > 3,301 ==> 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.
Wells Fargo's gearing of this year was 0.10914856. Wells Fargo's gearing of last year was 0.1191154.
==> 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
* 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.
Wells Fargo's current ratio of this year was 1.10508449. Wells Fargo's current ratio of last year was 1.10806342.
==> 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.
Wells Fargo's number of shares in issue this year was 4151.3. Wells Fargo's number of shares in issue last year was 4233.1.
==> 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.
Wells Fargo's net margin of this year was 0.04563174. Wells Fargo's net margin of last year was 0.2298179.
==> 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
Wells Fargo's asset turnover of this year was 0.03752941. Wells Fargo's asset turnover of last year was 0.04486722.
==> 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
+
0
+
1
+
0
+
0
=
5
Good or high score = 7, 8, 9
Bad or low score = 0, 1, 2, 3
Wells Fargo 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.
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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