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GuruFocus has detected 6 Warning Signs with Sears Holdings Corp $SHLD.
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Sears Holdings Corp (NAS:SHLD)
Piotroski F-Score
1 (As of Today)

Warning Sign:

Piotroski F-Score of 1 is low, which usually implies poor business operation.

The zones of discrimination were as such:

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

Sears Holdings Corp has an F-score of 1. It is a bad or low score, which usually implies poor business operation.

SHLD' s Piotroski F-Score Range Over the Past 10 Years
Min: 1   Max: 9
Current: 1

1
9

During the past 13 years, the highest Piotroski F-Score of Sears Holdings Corp was 9. The lowest was 1. 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 (Apr17) TTM:Last Year (Apr16) TTM:
Net Income was -395 + -748 + -607 + 244 = $-1,506 Mil.
Cash Flow from Operations was 82 + -768 + 27 + -880 = $-1,539 Mil.
Revenue was 5663 + 5029 + 6052 + 4301 = $21,045 Mil.
Gross Profit was 1260 + 962 + 1287 + 930 = $4,439 Mil.
Average Total Assets from the begining of this year (Apr16)
to the end of this year (Apr17) was
(11175 + 10614 + 10865 + 9362 + 9071) / 5 = $10217.4 Mil.
Total Assets at the begining of this year (Apr16) was $11,175 Mil.
Long-Term Debt was $3,329 Mil.
Total Current Assets was $4,938 Mil.
Total Current Liabilities was $4,811 Mil.
Net Income was 208 + -454 + -580 + -471 = $-1,297 Mil.

Revenue was 6211 + 5750 + 7303 + 5394 = $24,658 Mil.
Gross Profit was 1435 + 1262 + 1595 + 1177 = $5,469 Mil.
Average Total Assets from the begining of last year (Apr15)
to the end of last year (Apr16) was
(13290 + 13186 + 12769 + 11337 + 11175) / 5 = $12351.4 Mil.
Total Assets at the begining of last year (Apr15) was $13,290 Mil.
Long-Term Debt was $3,312 Mil.
Total Current Assets was $6,120 Mil.
Total Current Liabilities was $4,594 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.

Sears Holdings Corp's current net income (TTM) was -1,506. ==> Negative ==> Score 0.

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.

Sears Holdings Corp's current cash flow from operations (TTM) was -1,539. ==> Negative ==> Score 0.

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 (TTM)/Total Assets at the Beginning of This Year (Apr16)
=-1506/11175
=-0.1347651

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Apr15)
=-1297/13290
=-0.09759217

Sears Holdings Corp's return on assets of this year was -0.1347651. Sears Holdings Corp's return on assets of last year was -0.09759217. ==> 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.

Sears Holdings Corp's current net income (TTM) was -1,506. Sears Holdings Corp's current cash flow from operations (TTM) was -1,539. ==> -1,539 <= -1,506 ==> 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: Apr17)=Long-Term Debt/Average Total Assets from Apr16 to Apr17
=3329/10217.4
=0.32581674

Gearing (Last Year: Apr16)=Long-Term Debt/Average Total Assets from Apr15 to Apr16
=3312/12351.4
=0.26814774

Sears Holdings Corp's gearing of this year was 0.32581674. Sears Holdings Corp's gearing of last year was 0.26814774. ==> 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

Current Ratio (This Year: Apr17)=Total Current Assets/Total Current Liabilities
=4938/4811
=1.02639784

Current Ratio (Last Year: Apr16)=Total Current Assets/Total Current Liabilities
=6120/4594
=1.3321724

Sears Holdings Corp's current ratio of this year was 1.02639784. Sears Holdings Corp's current ratio of last year was 1.3321724. ==> 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.

Sears Holdings Corp's number of shares in issue this year was 107.2. Sears Holdings Corp's number of shares in issue last year was 106.8. ==> 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.

Gross Margin (This Year: TTM)=Gross Profit/Revenue
=4439/21045
=0.21092896

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=5469/24658
=0.22179414

Sears Holdings Corp's gross margin of this year was 0.21092896. Sears Holdings Corp's gross margin of last year was 0.22179414. ==> 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 (Apr16)
=21045/11175
=1.88322148

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Apr15)
=24658/13290
=1.85537998

Sears Holdings Corp's asset turnover of this year was 1.88322148. Sears Holdings Corp's asset turnover of last year was 1.85537998. ==> 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
=0+0+0+0+0+0+0+0+1
=1

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

Sears Holdings Corp has an F-score of 1. It is a bad or low score, which usually implies poor business operation.


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.

Sears Holdings Corp Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
Question 1 1111000000
Question 2 1111000000
Question 3 0010010010
Question 4 1110111101
Question 5 1110100010
Question 6 0101000010
Question 7 1111110001
Question 8 0010010010
Question 9 0110011011
F-score 5784352153

Sears Holdings Corp Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
Question 1 0000000000
Question 2 0000000000
Question 3 0011100000
Question 4 1100000110
Question 5 0001100000
Question 6 0011110000
Question 7 0100001010
Question 8 0011100000
Question 9 0001111111
F-score 1235522231
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