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GuruFocus has detected 4 Warning Signs with Office Depot Inc $ODP.
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Office Depot Inc (NAS:ODP)
Piotroski F-Score
7 (As of Today)

Good Sign:

Piotroski F-Score of 7 is 7, indicating very healthy situation.

The zones of discrimination were as such:

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

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

ODP' s Piotroski F-Score Range Over the Past 10 Years
Min: 2   Max: 9
Current: 7

2
9

During the past 13 years, the highest Piotroski F-Score of Office Depot Inc was 9. The lowest was 2. And the median was 5.


Definition

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 (Mar17) TTM:Last Year (Mar16) TTM:
Net Income was 210 + 44 + 229 + 116 = $599 Mil.
Cash Flow from Operations was 215 + 299 + 45 + 88 = $647 Mil.
Revenue was 3218 + 2836 + 2726 + 2676 = $11,456 Mil.
Gross Profit was 747 + 726 + 654 + 675 = $2,802 Mil.
Average Total Assets from the begining of this year (Mar16)
to the end of this year (Mar17) was
(6034 + 6173 + 5881 + 5540 + 5435) / 5 = $5812.6 Mil.
Total Assets at the begining of this year (Mar16) was $6,034 Mil.
Long-Term Debt was $1,145 Mil.
Total Current Assets was $2,924 Mil.
Total Current Liabilities was $1,846 Mil.
Net Income was -58 + 6 + 15 + 46 = $9 Mil.

Revenue was 3440 + 3046 + 2766 + 2876 = $12,128 Mil.
Gross Profit was 814 + 787 + 656 + 715 = $2,972 Mil.
Average Total Assets from the begining of last year (Mar15)
to the end of last year (Mar16) was
(6548 + 6360 + 6459 + 6442 + 6034) / 5 = $6368.6 Mil.
Total Assets at the begining of last year (Mar15) was $6,548 Mil.
Long-Term Debt was $1,437 Mil.
Total Current Assets was $3,696 Mil.
Total Current Liabilities was $2,315 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.

Office Depot Inc's current net income (TTM) was 599. ==> 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.

Office Depot Inc's current cash flow from operations (TTM) was 647. ==> 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.

Office Depot Inc's return on assets of this year was 0.0992708. Office Depot Inc's return on assets of last year was 0.00137447. ==> 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.

Office Depot Inc's current net income (TTM) was 599. Office Depot Inc's current cash flow from operations (TTM) was 647. ==> 647 > 599 ==> 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: Mar17)=Long-Term Debt/Average Total Assets from Mar16 to Mar17
=1145/5812.6
=0.19698586

Gearing (Last Year: Mar16)=Long-Term Debt/Average Total Assets from Mar15 to Mar16
=1437/6368.6
=0.22563829

Office Depot Inc's gearing of this year was 0.19698586. Office Depot Inc's gearing of last year was 0.22563829. ==> 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: Mar17)=Total Current Assets/Total Current Liabilities
=2924/1846
=1.58396533

Current Ratio (Last Year: Mar16)=Total Current Assets/Total Current Liabilities
=3696/2315
=1.59654428

Office Depot Inc's current ratio of this year was 1.58396533. Office Depot Inc's current ratio of last year was 1.59654428. ==> 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.

Office Depot Inc's number of shares in issue this year was 515. Office Depot Inc's number of shares in issue last year was 549. ==> 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
=2802/11456
=0.24458799

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=2972/12128
=0.24505277

Office Depot Inc's gross margin of this year was 0.24458799. Office Depot Inc's gross margin of last year was 0.24505277. ==> 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 (TTM)/Total Assets at the Beginning of This Year (Mar16)
=11456/6034
=1.89857474

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Mar15)
=12128/6548
=1.8521686

Office Depot Inc's asset turnover of this year was 1.89857474. Office Depot Inc's asset turnover of last year was 1.8521686. ==> 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+1+1+0+1+0+1
=7

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

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


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.


Related Terms

Net Income, Cash Flow from Operations, Revenue, Gross Profit, Total Assets, Long-Term Debt, Total Current Assets, Total Current Liabilities


Historical Data

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

Office Depot Inc Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1000100011
Question 2 1111110111
Question 3 0011101011
Question 4 1111110110
Question 5 1000010101
Question 6 1010101010
Question 7 1101010001
Question 8 0011010111
Question 9 0011111010
F-score 6366663476

Office Depot Inc Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Question 1 0000111111
Question 2 1111111111
Question 3 0111111111
Question 4 1111111101
Question 5 1111000111
Question 6 0011111000
Question 7 0000010111
Question 8 1111111010
Question 9 0000111101
F-score 4566787767
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