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Red Hat Inc  (NYSE:RHT) Piotroski F-Score: 9 (As of Today)

Good Sign:

Piotroski F-Score of 9 is 9, 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

Red Hat Inc has an F-score of 9. It is a good or high score, which usually indicates a very healthy situation.

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

2
9

During the past 13 years, the highest Piotroski F-Score of Red Hat Inc was 9. The lowest was 2. And the median was 7.


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.

Red Hat Inc Annual Data

Feb08 Feb09 Feb10 Feb11 Feb12 Feb13 Feb14 Feb15 Feb16 Feb17
Piotroski F-Score Premium Member Only Premium Member Only Premium Member Only Premium Member Only Premium Member Only 7.00 7.00 6.00 6.00 9.00

Red Hat Inc Quarterly Data

Nov12 Feb13 May13 Aug13 Nov13 Feb14 May14 Aug14 Nov14 Feb15 May15 Aug15 Nov15 Feb16 May16 Aug16 Nov16 Feb17 May17 Aug17
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 8.00 9.00 9.00 9.00

Competitive Comparison
* Competitive companies are chosen from companies within the same industry, with headquarter located in same country, with closest market capitalization; x-axis shows the market cap, and y-axis shows the term value; the bigger the dot, the larger the market cap.

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 (Aug17) TTM:Last Year (Aug16) TTM:
Net Income was 67.943 + 65.803 + 73.19 + 96.859 = $304 Mil.
Cash Flow from Operations was 136.359 + 318.259 + 257.872 + 142.896 = $855 Mil.
Revenue was 615.26 + 628.84 + 676.796 + 723.355 = $2,644 Mil.
Gross Profit was 524.807 + 536.633 + 576.1 + 616.638 = $2,254 Mil.
Average Total Assets from the begining of this year (Aug16)
to the end of this year (Aug17) was
(4100.756 + 4085.093 + 4535.185 + 4512.436 + 4639.384) / 5 = $4374.5708 Mil.
Total Assets at the begining of this year ({FiscalYear0}) was $4,101 Mil.
Long-Term Debt & Capital Lease Obligation was $757 Mil.
Total Current Assets was $2,332 Mil.
Total Current Liabilities was $1,796 Mil.
Total Assets was 46.848 + 53.036 + 61.184 + 58.772 = $220 Mil.

Revenue was 523.58 + 543.502 + 567.899 + 599.805 = $2,235 Mil.
Gross Profit was 442.532 + 462.282 + 483.851 + 512.134 = $1,901 Mil.
Average Total Assets from the begining of last year (Aug15)
to the end of last year (Aug16) was
(3801.471 + 3899.205 + 4155.099 + 4112.281 + 4100.756) / 5 = $4013.7624 Mil.
Total Assets at the begining of last year (Aug15) was $3,801 Mil.
Long-Term Debt & Capital Lease Obligation was $735 Mil.
Total Current Assets was $1,848 Mil.
Total Current Liabilities was $1,509 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.

Red Hat Inc's current Net Income (TTM) was {NetIncome0_f}. ==> 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.

Red Hat Inc's current Cash Flow from Operations (TTM) was 855. ==> 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(Aug16)
=303.795/4100.756
=0.07408268

ROA (Last Year)=Net Income/Total Assets(Aug15)
=219.84/3801.471
=0.05783025

Red Hat Inc's return on assets of this year was 0.07408268. Red Hat Inc's return on assets of last year was 0.05783025. ==> 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.

Red Hat Inc's current Net Income (TTM) was 304. Red Hat Inc's current Cash Flow from Operations (TTM) was 855. ==> 855 > 304 ==> 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: Aug17)=Long-Term Debt & Capital Lease Obligation/Total Assetsfrom Aug16 to Aug17
=756.743/4374.5708
=0.1729868

Gearing (Last Year: Aug16)=Long-Term Debt & Capital Lease Obligation/Total Assetsfrom Aug15 to Aug16
=734.7/4013.7624
=0.18304521

Red Hat Inc's gearing of this year was 0.1729868. Red Hat Inc's gearing of last year was 0.18304521. ==> 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: Aug17)=Total Current Assets/Total Current Liabilities
=2332.363/1795.826
=1.29876892

Current Ratio (Last Year: Aug16)=Total Current Assets/Total Current Liabilities
=1848.22/1509.28
=1.22457066

Red Hat Inc's current ratio of this year was 1.29876892. Red Hat Inc's current ratio of last year was 1.22457066. ==> 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.

Red Hat Inc's number of shares in issue this year was 183. Red Hat Inc's number of shares in issue last year was 183.3. ==> 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
=2254.178/2644.251
=0.85248261

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=1900.799/2234.786
=0.85055079

Red Hat Inc's gross margin of this year was 0.85248261. Red Hat Inc's gross margin of last year was 0.85055079. ==> 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 (Aug16)
=2644.251/4100.756
=0.64482037

Asset Turnover (Last Year)=Revenue/Total Assets at the Beginning of Last Year (Aug15)
=2234.786/3801.471
=0.58787401

Red Hat Inc's asset turnover of this year was 0.64482037. Red Hat Inc's asset turnover of last year was 0.58787401. ==> 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+1+1+1+1
=9

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

Red Hat Inc has an F-score of 9. 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.


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