Piotroski F-Score – 9 Criteria for Financial Strength
What Is the Piotroski F-Score?
The Piotroski F-Score was developed in 2000 by US professor Joseph Piotroski. It assesses a company's financial strength and quality based on nine criteria from three areas: profitability, leverage/liquidity, and operating efficiency. Each criterion met scores one point, with a maximum score of 9 points.
The 9 Criteria
| F1 | Positive net income (ROA > 0) |
| F2 | Positive operating cashflow |
| F3 | Improvement in ROA vs. prior year |
| F4 | Cashflow > net income (accrual signal) |
| F5 | Long-term debt decreased |
| F6 | Current ratio improved |
| F7 | No dilution (no new shares issued) |
| F8 | Gross margin improved |
| F9 | Asset turnover improved |
Interpretation
| Score | Interpretation |
|---|---|
| 8 – 9 | Very strong balance sheet quality |
| 5 – 7 | Solid fundamentals |
| 3 – 4 | Average |
| 0 – 2 | Weak balance sheet quality |
Influence on the Finanzoo F-Score
Finanzoo integrates the Piotroski F-Score as a correction factor for the Finanzoo F-Score. A high Piotroski score can increase the overall score by up to 25 points, while a low score can decrease it by up to 50 points. This gives Finanzoo particularly strong weight to balance sheet quality as a risk buffer.
Research Background
Piotroski showed in his study that a strategy of buying low-valued stocks with a high F-Score and short-selling those with a low F-Score achieved an annual excess return of approximately 23%. The score is thus one of the most empirically well-supported valuation models in fundamental stock analysis.
Limitations of the Model
The Piotroski F-Score is also an automated, algorithmic evaluation of historical balance-sheet data and does not constitute investment advice, nor a recommendation to buy or sell. The empirical results of the original study stem from past market phases and are not an indicator of future price performance. The underlying data is mostly sourced from public sources such as www.bundesanzeiger.de and www.sec.gov; no guarantee is given for their accuracy or completeness. For further details see Legal Notices & Risk Disclaimer.