Piotroski F-Score

Joseph Piotroski, an accounting professor, developed a nine point scoring system - the Piotroski F-Score - to increase the returns of a strategy of buying low price to book value companies.
Buying only those companies that scored highest (8 or 9) on his nine-point scale, over the 20 year period from 1976 to 1996 led to an average market out-performance 13.4%.

Calculated On Trailing 12 Months

All the F-Score ratios are calculated on a trailing 12 months (TTM) basis.

This means the last twelve months (not the company’s financial year) is compared to the same period in the past. We do this to make sure that the screener data includes the latest, most up to date, financial results of the company.

How is the Piotroski or F-Score calculated?

Profitability
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

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

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

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

Funding

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 1 if gearing is lower, 0 if it’s higher.

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

7. Change in shares in issue
Compare the number of shares in issue this year, to the number in issue last year.
Score 1 if there is the same number of shares in issue this year, or fewer. Score 0 if there are more shares in issue.

Efficiency
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

9. Change in asset turnover
Compare this year’s asset turnover (total sales 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

Evaluation
Piotroski or F-Score = 1 + 2 + 3 + 4 + 5 + 6 + 7 + 8 + 9
Good or high score = 8 or 9 = Good F-Score
Bad or low score = 0 or 1 = Bad F-Score

How to use the Piotroski F-Score

Available as a screening ratio: Yes

Available as an output column ratio: Yes (Look under the Quality heading)

How to select the highest F-Score companies

To find companies with the highest or best Piotroski F-Score set the slider from 0% to 10%.

Are there any F-Score values missing

Also take a look at the indicator F score missing values. It shows you how many of the 9 Piotroski F-Score values could not be calculated.

For example, if the Piotroski F-Score = 6 and the F score missing values = 3 it means 3 of the 9 Piotroski F-Score components could not be calculated because the data was not available.

If a component of the Piotroski F-Score cannot be calculated a 0 value is entered for that component.

Screen Stocks Using the Piotroski F-Score

The Quant Investing screener includes the Piotroski F-Score as one of 110+ ratios you can use to filter and rank 22,000+ companies worldwide. Combine it with other ratios to build your own investment screens.

Screen 22,000+ Companies Using the F-Score

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