Piotroski F-score


Piotroski F-score is a number between 0 and 9 which is used to assess strength of company's financial position. The score is used by financial investors in order to find the best value stocks. The score is named after Stanford accounting professor Joseph Piotroski.

Calculation procedure

The score is calculated based on 9 criteria divided into 3 groups.
  1. Return on Assets ;
  2. Operating Cash Flow ;
  3. Change in Return of Assets ;
  4. Accruals ;
  5. :Leverage, Liquidity and Source of Funds
  6. Change in Leverage ratio ;
  7. Change in Current ratio ;
  8. Change in the number of shares ;
  9. :Operating Efficiency
  10. Change in Gross Margin ;
  11. Change in Asset Turnover ratio ;
Some adjustments that were done in calculation of the required financial ratios are discussed in the original paper.
The score is calculated based on the data from financial statement of a company. A company gets 1 point for each met criteria. Summing up of all achieved points gives Piotroski F-score.

Interpretation

A company that has Piotroski F-score of 8–9 is considered to be strong. Alternatively, firms achieving the F-score of 0–2 are considered to be weak.
Average value of Piotroski F-score can be different in different branches of economy. This should be taken into consideration when comparing companies with different specializations.

Other notes