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GuruFocus has detected 3 Warning Signs with Staples Inc $SPLS.
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Staples Inc (NAS:SPLS)
Piotroski F-Score
3 (As of Today)

Warning Sign:

Piotroski F-Score of 3 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

Staples Inc has an F-score of 4 indicating the company's financial situation is typical for a stable company.

SPLS' s Piotroski F-Score Range Over the Past 10 Years
Min: 3   Max: 8
Current: 3

3
8

During the past 13 years, the highest Piotroski F-Score of Staples Inc was 8. The lowest was 3. And the median was 6.


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 -766 + 179 + -952 + -815 = $-2,354 Mil.
Cash Flow from Operations was -287 + 641 + 304 + 258 = $916 Mil.
Revenue was 4752 + 5355 + 3039 + 4149 = $17,295 Mil.
Gross Profit was 1192 + 1443 + 835 + 1078 = $4,548 Mil.
Average Total Assets from the begining of this year (Apr16)
to the end of this year (Apr17) was
(12815 + 9483 + 9387 + 8271 + 7510) / 5 = $9493.2 Mil.
Total Assets at the begining of this year (Apr16) was $12,815 Mil.
Long-Term Debt was $526 Mil.
Total Current Assets was $4,585 Mil.
Total Current Liabilities was $3,194 Mil.
Net Income was 36 + 198 + 86 + 41 = $361 Mil.

Revenue was 4937 + 5593 + 2973 + 4363 = $17,866 Mil.
Gross Profit was 1264 + 1522 + 775 + 1112 = $4,673 Mil.
Average Total Assets from the begining of last year (Apr15)
to the end of last year (Apr16) was
(10438 + 10326 + 10318 + 10172 + 12815) / 5 = $10813.8 Mil.
Total Assets at the begining of last year (Apr15) was $10,438 Mil.
Long-Term Debt was $3,489 Mil.
Total Current Assets was $5,289 Mil.
Total Current Liabilities was $3,320 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.

Staples Inc's current net income (TTM) was -2,354. ==> 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.

Staples Inc's current cash flow from operations (TTM) was 916. ==> 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 (TTM)/Total Assets at the Beginning of This Year (Apr16)
=-2354/12815
=-0.18369099

Staples Inc's return on assets of this year was -0.18369099. Staples Inc's return on assets of last year was 0.03458517. ==> 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.

Staples Inc's current net income (TTM) was -2,354. Staples Inc's current cash flow from operations (TTM) was 916. ==> 916 > -2,354 ==> 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: Apr17)=Long-Term Debt/Average Total Assets from Apr16 to Apr17
=526/9493.2
=0.05540808

Gearing (Last Year: Apr16)=Long-Term Debt/Average Total Assets from Apr15 to Apr16
=3489/10813.8
=0.32264329

Staples Inc's gearing of this year was 0.05540808. Staples Inc's gearing of last year was 0.32264329. ==> 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: Apr17)=Total Current Assets/Total Current Liabilities
=4585/3194
=1.43550407

Current Ratio (Last Year: Apr16)=Total Current Assets/Total Current Liabilities
=5289/3320
=1.59307229

Staples Inc's current ratio of this year was 1.43550407. Staples Inc's current ratio of last year was 1.59307229. ==> 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.

Staples Inc's number of shares in issue this year was 657. Staples Inc's number of shares in issue last year was 649. ==> 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
=4548/17295
=0.26296618

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=4673/17866
=0.26155827

Staples Inc's gross margin of this year was 0.26296618. Staples Inc's gross margin of last year was 0.26155827. ==> 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 (TTM)/Total Assets at the Beginning of This Year (Apr16)
=17295/12815
=1.34959032

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Apr15)
=17866/10438
=1.71163058

Staples Inc's asset turnover of this year was 1.34959032. Staples Inc's asset turnover of last year was 1.71163058. ==> 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
=0+1+0+1+1+0+0+1+0
=4

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

Staples Inc has an F-score of 4 indicating the company's financial situation is typical for a stable company.


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.

Staples Inc Annual Data

Jan08Jan09Jan10Jan11Jan12Jan13Jan14Jan15Jan16Jan17
Question 1 1111101110
Question 2 1111111111
Question 3 0001101010
Question 4 1111111111
Question 5 1001110001
Question 6 1010101010
Question 7 1001111100
Question 8 1001000011
Question 9 0100111010
F-score 7447857474

Staples Inc Quarterly Data

Jan15Apr15Jul15Oct15Jan16Apr16Jul16Oct16Jan17Apr17
Question 1 1111110000
Question 2 1111111111
Question 3 0000110000
Question 4 1111111111
Question 5 0000000011
Question 6 0111110100
Question 7 1100000000
Question 8 0011111011
Question 9 0000111100
F-score 4555774444
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