Piotroski F-score (Piotroski)
Nine yes-or-no tests of profitability, leverage and efficiency, scored one point each out of nine.
Piotroski showed that among cheap stocks, this score separates the ones that recover from the ones that keep falling.
How it is computed here
One point each for: positive return on assets, positive operating cash flow, rising return on assets, operating cash flow above net income, falling leverage, rising current ratio, no new shares issued, rising gross margin, rising asset turnover.
Computed across several filed fiscal years. Filed under health. Higher is the stronger reading, other things equal.
The readings, and where the lines come from
| Range | Reading |
|---|---|
| below 2/9 | Low, as he defines it |
| 2/9 to 8/9 | Conflicting signals |
| 8/9 and above | High, as he defines it |
Piotroski (2000), Journal of Accounting Research. The bands below are his own classification: he calls 0 and 1 low, calls 8 and 9 high, and says most companies cluster between with conflicting signals.
When it misleads
- Designed for cheap stocks specifically. A high score on an expensive company was never what the paper was about.
- Six of the nine tests compare against the prior year, so a company with only one filed year scores those as failures.
- Every test is binary. A margin that rose by a hundredth of a point scores the same as one that doubled.
Questions
How is piotroski f-score calculated?
One point each for: positive return on assets, positive operating cash flow, rising return on assets, operating cash flow above net income, falling leverage, rising current ratio, no new shares issued, rising gross margin, rising asset turnover.. Computed across several filed fiscal years.
What does piotroski f-score tell a value investor?
Piotroski showed that among cheap stocks, this score separates the ones that recover from the ones that keep falling.
When does piotroski f-score mislead?
Designed for cheap stocks specifically. A high score on an expensive company was never what the paper was about. Six of the nine tests compare against the prior year, so a company with only one filed year scores those as failures. Every test is binary. A margin that rose by a hundredth of a point scores the same as one that doubled.