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GuruFocus has detected 4 Warning Signs with Telefonica SA $TEF.
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Telefonica SA (NYSE:TEF)
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

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

TEF' s Piotroski F-Score Range Over the Past 10 Years
Min: 1   Max: 8
Current: 7

1
8

During the past 13 years, the highest Piotroski F-Score of Telefonica SA was 8. 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 (Mar17) TTM:Last Year (Mar16) TTM:
Net Income was 778.651685393 + 1103.25476992 + 151.898734177 + 833.155080214 = $2,867 Mil.
Cash Flow from Operations was 0 + 0 + 0 + 2933.68983957 = $2,934 Mil.
Revenue was 14295.505618 + 14680.1346801 + 14473.628692 + 14044.9197861 = $57,494 Mil.
Gross Profit was 10084.2696629 + 10544.332211 + 10112.8691983 + 10055.6149733 = $40,797 Mil.
Average Total Assets from the begining of this year (Mar16)
to the end of this year (Mar17) was
(136045.657016 + 138208.988764 + 135428.731762 + 130422.995781 + 137031.016043) / 5 = $135427.477873 Mil.
Total Assets at the begining of this year (Mar16) was $136,046 Mil.
Long-Term Debt was $0 Mil.
Total Current Assets was $26,030 Mil.
Total Current Liabilities was $36,171 Mil.
Net Income was 2122.33445567 + 992.14365881 + -1995.64270153 + 864.142538976 = $1,983 Mil.

Revenue was 13328.8439955 + 13377.1043771 + 12943.3551198 + 12008.908686 = $51,658 Mil.
Gross Profit was 9700.33670034 + 9731.7620651 + 9271.24183007 + 8785.077951 = $37,488 Mil.
Average Total Assets from the begining of last year (Mar15)
to the end of last year (Mar16) was
(135067.099567 + 146619.52862 + 138166.105499 + 133958.605664 + 136045.657016) / 5 = $137971.399273 Mil.
Total Assets at the begining of last year (Mar15) was $135,067 Mil.
Long-Term Debt was $55,212 Mil.
Total Current Assets was $34,561 Mil.
Total Current Liabilities was $34,965 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.

Telefonica SA's current net income (TTM) was 2,867. ==> 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.

Telefonica SA's current cash flow from operations (TTM) was 2,934. ==> 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 (Mar16)
=2866.96026971/136045.657016
=0.02107352

ROA (Last Year)=Net Income (TTM)/Total Assets at the Beginning of Last Year (Mar15)
=1982.97795193/135067.099567
=0.01468143

Telefonica SA's return on assets of this year was 0.02107352. Telefonica SA's return on assets of last year was 0.01468143. ==> 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.

Telefonica SA's current net income (TTM) was 2,867. Telefonica SA's current cash flow from operations (TTM) was 2,934. ==> 2,934 > 2,867 ==> 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
=0/135427.477873
=0

Gearing (Last Year: Mar16)=Long-Term Debt/Average Total Assets from Mar15 to Mar16
=55211.5812918/137971.399273
=0.40016686

Telefonica SA's gearing of this year was 0. Telefonica SA's gearing of last year was 0.40016686. ==> 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
=26029.9465241/36171.1229947
=0.71963335

Current Ratio (Last Year: Mar16)=Total Current Assets/Total Current Liabilities
=34561.247216/34965.4788419
=0.98843912

Telefonica SA's current ratio of this year was 0.71963335. Telefonica SA's current ratio of last year was 0.98843912. ==> 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.

Telefonica SA's number of shares in issue this year was 5062. Telefonica SA's number of shares in issue last year was 5073. ==> 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
=40797.0860455/57494.1887762
=0.70958625

Gross Margin (Last Year: TTM)=Gross Profit/Revenue
=37488.4185465/51658.2121784
=0.72570104

Telefonica SA's gross margin of this year was 0.70958625. Telefonica SA's gross margin of last year was 0.72570104. ==> 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)
=57494.1887762/136045.657016
=0.42260951

Asset Turnover (Last Year)=Revenue (TTM)/Total Assets at the Beginning of Last Year (Mar15)
=51658.2121784/135067.099567
=0.38246333

Telefonica SA's asset turnover of this year was 0.42260951. Telefonica SA's asset turnover of last year was 0.38246333. ==> 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

Telefonica SA 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.

Telefonica SA Annual Data

Dec07Dec08Dec09Dec10Dec11Dec12Dec13Dec14Dec15Dec16
Question 1 1111111111
Question 2 0111100001
Question 3 0011001001
Question 4 0011000000
Question 5 1101101111
Question 6 1010111010
Question 7 1110100010
Question 8 0110100010
Question 9 0110100001
F-score 4685724255

Telefonica SA Quarterly Data

Dec14Mar15Jun15Sep15Dec15Mar16Jun16Sep16Dec16Mar17
Question 1 1111111111
Question 2 0000011111
Question 3 0000000011
Question 4 0000011101
Question 5 1111100011
Question 6 0100100000
Question 7 0000101101
Question 8 0111111100
Question 9 0000000111
F-score 2433545657
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