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5-Minute QuickScan

5 Minute QuickScan
Date:
		Basic Quality Standards			Question 2	Question 3	Question 4	Question 5	Question 6	Question 7	Decision
Company Name	Ticker	.OB or .PK?	Mkt Cap < $500M ?	Recent IPO?	3 to 5 years Positive EBIT?	3 to 5 years of positive Cash Flow from Operating Activities?	5 years of ROE > 10%?	5 Years of Debt to Equity Ratio < 1?	Recent Price to Book Ratio < 2?	3 years of only positive net Tangible Assets?	Keep and Conitue to Analyze or Drop Company?
Analog Device INC.	ADI		NO	NO	YES	YES	YES	NO	YES	YES	Keep and Conitue to Analyze

Data Input

Stock Ticker	ADI
Year	2014	2013	2012	2011	2010
Quote
Current Price	60.19
P/E	26.9
Market Cap	1888	[in million USD]
Shares Outstanding	313.67	[in million]
Earnings
Earnings Growth Rate
Company [Next 5 Years]	11.4	[in decimal]
Financials
Income Statement
	2014	2013	2012	2011	2010
Total Revenue (Sales)	2,864,773	2,633,689	2,701,142	2,993,320	2,761,503
Gross Profit	1,830,188	1,692,411	1,741,001	1,986,541	1,799,422
Operating Income	752,484	753,075	824,048	1,072,025	900,074
Net Income	629,320	673,487	651,236	867,394	712,084
Interest Expense, Supplemental	34,784	27,102	26,422	19,146	10,429
Diluted Normalized EPS	1.98	2.14	2.13	2.81	2.33
Balance Sheet
	2014	2013	2012	2011	2010
Total Inventory	367,927	283,337	313,723	295,081	277,478
Total Current Assets	3,811,886	5,472,425	4,696,185	4,386,348	3,478,999
Total Assets	6,859,690	6,381,750	5,620,347	5,277,635	4,328,831
Total Current Liabilities	709,056	570,512	525,079	525,005	643,467
Total Long Term Debt	872,789	872,241	807,098	871,876	400,635
Total Liabilities	1,392,737	1,071,662	929,909	957,217	485,647
Retained Earnings (Accumulated Deficit)	4,231,496	4,056,401	3,788,869	3,482,334	2,896,566
Total Equity	4,757,897	4,739,576	4,165,359	3,795,413	3,199,717
	2014	2013	2012	2011	2010
Total Common Shares Outstanding	311,204.93	311,045.08	301,389.18	297,960.72	298,652.99
Cash Flow Statement
	2014	2013	2012	2011	2010
Cash from Operating Activities	871,602	912,345	814,542	900,529	991,175
Capital Expenditures (Ignore the negative sign)	177,913	123,074	132,176	122,996	111,557
Fundamentals
Key Ratio [10 Year Summary]
	Avg P/E	Book Value/ Share
2014	2.79	15.29
2013	2.97	15.24
2012	2.68	13.82
2011	3.02	12.74
2010	3.34	10.71
2009	1.49
2008	2.29
2007	2.5
2006	1.74
2005	1.81

Value Indicators

Value Indicators Worksheet
1	ROIC - ROIC > 12% since most businesses lends between 8% and 12%
	Year	2014	2013	2012	2011	2010
	Net Income	629,320.0	673,487.0	651,236.0	867,394.0	712,084.0
	Interest	34,784.00	27,102.00	26,422.00	19,146.00	10,429.00
	Long-Term Debt	872,789.00	872,241.00	807,098.00	871,876.00	400,635.00
	Total Equity	4,757,897.0	4,739,576.0	4,165,359.0	3,795,413.0	3,199,717.0
	Invested Capital	5,630,686.0	5,611,817.0	4,972,457.0	4,667,289.0	3,600,352.0
	ROIC	0.12	0.12	0.14	0.19	0.20
2	Equity Growth Rates:
	Year	2014	2013	2012	2011	2010
	BVPS	15.29	15.24	13.82	12.74	10.71
	4-year Growth rate	3-year Growth rate	2-year Growth rate	1-year Growth rate
	0.09	0.06	0.05	0.00
3	EPS Growth Rates:
	Year	2014	2013	2012	2011	2010
	EPS	1.98	2.14	2.13	2.81	2.33
	4-year Growth rate	3-year Growth rate	2-year Growth rate	1-year Growth rate
	-0.04	-0.11	-0.04	-0.07
4	Sales Growth Rates
	Year	2014	2013	2012	2011	2010
	Sales (Revenue)	2,864,773.00	2,633,689.00	2,701,142.00	2,993,320.00	2,761,503.00
	Sales Growth Rates:
	4-year Growth rate	3-year Growth rate	2-year Growth rate	1-year Growth rate
	0.009	-0.015	0.030	0.088
5	Operating Cash Flow (OCF) and Free Cash Flow (FCF) growth rates
	Year	2014	2013	2012	2011	2010
	OCF	871,602.00	912,345.00	814,542.00	900,529.00	991,175.00
	CAPEX	177,913.00	123,074.00	132,176.00	122,996.00	111,557.00
	FCF	693,689.00	789,271.00	682,366.00	777,533.00	879,618.00
	OCF Growth Rates:
	4-year Growth rate	3-year Growth rate	2-year Growth rate	1-year Growth rate
	-0.032	-0.011	0.034	-0.045
	FCF Growth Rates:
	4-year Growth rate	3-year Growth rate	2-year Growth rate	1-year Growth rate
	-0.058	-0.037	0.008	-0.121
6	Gross Margin (>40% is sign of durable competitive advantage; <20% is indicator of highly competitive industry).
	Year	2014	2013	2012	2011	2010
	Sales	2864773	2633689	2701142	2993320	2761503
	Gross Profit	1830188.00	1692411.00	1741001.00	1986541.00	1799422.00
	Gross Margin	0.64	0.64	0.64	0.66	0.65
7	Operating Margin (>= industry or sector average). (Industry: … ...%; Average of competitors: … …%)
	Year	2014	2013	2012	2011	2010
	Sales	2864773	2633689	2701142	2993320	2761503
	Operating Profit	752,484.00	753,075.00	824,048.00	1,072,025.00	900,074.00
	Operating Margin	0.26	0.29	0.31	0.36	0.33
8	Net Margin (> 20% => competitive advantage; <10% sign of competition)
	Year	2014	2013	2012	2011	2010
	Sales	2864773	2633689	2701142	2993320	2761503
	Net Income	629320.00	673487.00	651236.00	867394.00	712084.00
	Net Margin	0.22	0.26	0.24	0.29	0.26
9	Free Cash Flow Margin (>= 10% indicator of competitive advantage; must not be < 3%).
	Year	2014	2013	2012	2011	2010
	Sales	2864773.00	2633689.00	2701142.00	2993320.00	2761503.00
	Free Cash Flow	693689.00	789271.00	682366.00	777533.00	879618.00
	FCF Margin	0.24	0.30	0.25	0.26	0.32
10	Short-Term Financial Health
10.1	Current Ratio ≥ 2
	Year	2014	2013	2012	2011	2010
	Current Assets	3,811,886.00	5,472,425.00	4,696,185.00	4,386,348.00	3,478,999.00
	Current Liabilities	709,056.00	570,512.00	525,079.00	525,005.00	643,467.00
	Current Ratio	5.38	9.59	8.94	8.35	5.41
10.2	Quick Ratio ≥ 1.5
	Year	2014	2013	2012	2011	2010
	Current Assets	3,811,886.0	5,472,425.0	4,696,185.0	4,386,348.0	3,478,999.0
	Inventory	367,927.0	283,337.0	313,723.0	295,081.0	277,478.0
	Current Liabilities	709,056.0	570,512.0	525,079.0	525,005.0	643,467.0
	Quick Ratio	4.86	9.10	8.35	7.79	4.98
10.3	Interest Coverage Ratio ≥ 5 minimum; but preferably ≥ 10 (except utilities ≥ 2)
	Year	2014	2013	2012	2011	2010
	EBIT	752,484.00	753,075.00	824,048.00	1,072,025.00	900,074.00
	Interest Expense	34,784.00	27,102.00	26,422.00	19,146.00	10,429.00
	Interest Coverage	21.6	27.8	31.2	56.0	86.3
10.4	Operating Cash Flow Ratio ≥ 1
	Year	2014	2013	2012	2011	2010
	OCF	871,602.00	912,345.00	814,542.00	900,529.00	991,175.00
	Current Liabilities	709,056.00	570,512.00	525,079.00	525,005.00	643,467.00
	OCF Ratio	1.23	1.60	1.55	1.72	1.54
11	Long-Term Financial Health
11.1	Leverage Ratio: Debt to Total Asset Ratio ≤ 0.50 except utilities for which 1.0 is acceptable
	Year	2014	2013	2012	2011	2010
	Long-Term Debt	872,789.0	872,241.0	807,098.0	871,876.0	400,635.0
	Total Assets	6,859,690.0	6,381,750.0	5,620,347.0	5,277,635.0	4,328,831.0
	Debt to Assets Ratio	0.13	0.14	0.14	0.17	0.09
11.2	Debt to Equity Ratio ≤ 1
	Year	2014	2013	2012	2011	2010
	Long-Term Debt	872,789.0	872,241.0	807,098.0	871,876.0	400,635.0
	Total Equity	4,757,897.0	4,739,576.0	4,165,359.0	3,795,413.0	3,199,717.0
	Debt - Equity Ratio	0.18	0.18	0.19	0.23	0.13
11.3	How long will it take the company to pay off its long-term debt using Cash Flow from Operations? 3 years or less.
	Year	2014	2013	2012	2011	2010
	Long-Term Debt	872,789.0	872,241.0	807,098.0	871,876.0	400,635.0
	OCF	871,602.0	912,345.0	814,542.0	900,529.0	991,175.0
	How long to payoff Debt	1.0	1.0	1.0	1.0	0.4
12	Growth in Retained Earnings
	Year	2014	2013	2012	2011	2010
	Retained Earnings	4231496	4056401	3788869	3482334	2896566
	4-year Growth rate	3-year Growth rate	2-year Growth rate	1-year Growth rate
	0.10	0.12	0.14	0.20
13	CAPEX Per Share
	Year	2014	2013	2012	2011	2010
	CAPEX	177913	123074	132176	122996	111557
	Common Stock Outstanding	311204.926	311045.084	301389.176	297960.718	298652.994
	CAPEX per Share	0.5716908221	0.3956789749	0.4385558956	0.4127926689	0.3735338411
	4-year Growth rate	3-year Growth rate	2-year Growth rate	1-year Growth rate
	0.11	0.02	0.08	0.11

PE Ratio Valuation

Estimating Intrinsic Value (P-E Ratio Approach), comparing with Price and Making Purchase Decision based on Margin of Safety

Step 8

Step 8A: Gathering Data

P/E Ratios

Year

Latest

Year -1

Year -2

Year -3

Year -4

Year -5

Year -6

Year -7

Year -8

Year -9

Year -10

P/E Ratio

26.9

2.79

2.97

2.68

3.02

3.34

1.49

2.29

2.5

1.74

1.81

Average P/E Ratio

4.68

**(Check the formula for average)

Analysts Estimate of EPS Growth Rate:

11.4

(see MSN Moneycentral Analysts Estimates)

Latest (full year) EPS =

1.98

k =

0.15

(may try different numbers based on what you know about the company's moat, financial health and historical ROA).

Current Price =

60.19

Step 8B:

Using the Data

EPS at end of last year, EPS0 =

1.98

1. Average EPS growth rate =

-0.04

(use the EPS growth rate over the longest period (3-, 4- or 5- year period) you can find)

2. Average Equity growth rate =

0.09

(use the BVPS growth rate over the longest period (3-, 4- or 5- year period) you can find)

3. Analysts estimate of EPS growth rate =

11.4

(see above)

Equity Growth Rate to use for Calculations =

-0.04

(This the lowest of the three numbers above)

Average P/E over 5 years or 10 years =

4.68

k, the required rate of return =

0.15

Step 9:

Estimating what the business is worth

1. Estimate EPS ten years from now, EPS10 = EPS0 (1+g)10

1.32

2. Multiply EPS10 by P/E and call that V10; that is V10 = (EPS10.)x(P/E).

6.17

This gives you the intrinsic value ("Sticker Price") ten years from now.

3. Calculate today’s supposed intrinsic value, V0 = V10 x [1/(1+k)10)]

1.53

Purchase Decision

Step 10:

Current Price =

60.19

Current Price/Intrinsic Value =

39.44

Margin of Safety

-38.44

Decision:

Buy if margin of Safety is greater 50%.

Consider buying or put on Watch List if Margin of Safety is between 20% and 50%.

Put on Watch List if Margin of Safety is less than 20%.

FCF Valuation

Estimating Intrinsic Value Using Free Cash Flow Approach
1	Data
	OCF =	871,602.0	Capital Expenditure =		177,913.0
	a. Latest FCF									693,689.0
	b. Rate of Growth of FCF over the next 10 years (use lower of 10% or company's 5-year growth rate)									-0.06
	c. Terminal Growth Rate (Rate of growth of FCF from year 11 in perpetuity - use average GDP growth rate)									0.03
	d. Discount rate									0.15
	e. Number of shares outstanding (undiluted)									313.67
	Number of shares outstanding from last year									311204.926	(for use in calculating F-Score)
	Number of shares outstanding two years ago									311045.084
2	Estimates
	a. Estimates of FCF from year 1 to year 10
	b. Estimate of intrinsic value in year 10
	c. Estimate of intrinsic value today
		Year:	0	1	2	3	4	5	6	7	8	9	10	11
			FCF0	FCF1	FCF2	FCF3	FCF4	FCF5	FCF6	FCF7	FCF8	FCF9	FCF10	FCF11
		FCF	693689.0	653706.0	616027.6	580520.9	547060.7	515529.1	485814.9	457813.4	431425.9	406559.3	383125.9	394619.7
		PV of FCF		568440.0	465805.4	381701.9	312783.7	256309.1	210031.2	172109.0	141033.9	115569.5	94702.9
		Intrinsic Value in Year 10											706840.3
		Intrinsic Value	$3,425,327
		Intrinsic Value per share	$10,920.16
3	Current market price				$ 60.19
4	Ratio of current price to intrinsic value				0.01
	Margin of Safety =				0.99
5	Purchase or sale decision
		Buy if Margin of Safety is 50% or more.
		Consider buying or putting on Watch List if Margin of Safety is between 20% and 50%.
		Put on Watch List if Margin of Safety is less than 20%.

Piotroski F Score

Piotroski Screening (F-Score) Criteria
	Criterion	Score
1	The return on assets for the last fiscal year (Y1) is positive	1
2	Cash from operations for the last fiscal year (Y1) is positive	1
3	The return on assets ratio for the last fiscal year (Y1) is greater than the return on assets ratio for the fiscal year two years ago (Y2)	0
4	Cash from operations for the last fiscal year (Y1) is greater than income after taxes for the last fiscal year (Y1)	1
5	The long-term debt to assets ratio for the last fiscal year (Y1) is less than the long-term debt to assets ratio for the fiscal year two years ago (Y2)	1
6	The current ratio for the last fiscal year (Y1) is greater than the current ratio for the fiscal year two years ago (Y2)	0
7	The average shares outstanding for the last fiscal year (Y1) is less than or equal to the average number of shares outstanding for the fiscal year two years ago (Y2)	0
8	The gross margin for the last fiscal year (Y1) is greater than the gross margin for the fiscal year two years ago (Y2)	0
9	The asset turnover for the last fiscal year (Y1) is greater than the asset turnover for the fiscal year two years ago (Y2)	1
	TOTAL	5
	F-Score of 8 or 9 => strong company; low probability of bankruptcy.
	F-Score between 0 and 2 => weak company; high probability of failing.

Altman Z Score

Altman Z Score:
Current Assets	3,811,886
Current Liabilities	709,056
Total Aseets	6,859,690
Operating Income	752,484
Market Cap	1,888
Total Liabilities	1,392,737
Retained Earnings	4,231,496
Sales	2,864,773
	Ratios	Score
X1 = Working Capital / Total Assets	0.4523280207	0.5427936248
X2 =Retained Earnings/Total Asets	0.6168640274	0.8636096383
X3 = Operating Income/Total Assets	0.1096965023	0.3619984577
X4 = Market Capitalization / Liabilities	0.0013556041	0.0008133625
X5 = Sales / Total Assets	0.4176242658	0.4176242658
	Total	2.1868393491
Z = 1.2X1 + 1.4X2 + 3.3X3 + 0.6X4 + 1.0X5
Z < 1.8 => High probability of bankruptcy
1.8 < Z < 2.7 => caution; moderate probability of bankruptcy
2.7 < Z < 2.99=> proceed with caution
Z > 3 => safe; bankruptcy unlikely.