F Score (Piotroski F-Score)
Returns the Piotroski F-Score, a discrete score between 0-9 that grades the financial strength of a company. Developed by Professor Joseph Piotroski.
Interpretation
| F-Score | Classification |
|---|---|
| 8-9 | Strong - High quality value stock |
| 5-7 | Average - Moderate financial health |
| 0-4 | Weak - Potential value trap |
Components (9 Criteria)
Profitability (4 points):
- Positive net income
- Positive operating cash flow
- Cash flow > net income
- Improving ROA
Leverage/Liquidity (3 points): 5. Decreasing long-term debt ratio 6. Improving current ratio 7. No equity dilution
Operating Efficiency (2 points): 8. Improving gross margin 9. Improving asset turnover
Notes
- Score 0-9 (integer, not decimal)
- Higher is better
- Designed for value investing
Examples
When to Use
- Value investing screening
- Financial health assessment
- Avoiding value traps
- Quality stock selection
When NOT to Use
| Scenario | Use Instead |
|---|---|
| Bankruptcy prediction | AltmanZScore() |
| Earnings manipulation | BeneishMScore() |
| Growth stocks | Growth-focused metrics |
| Technical analysis | Technical indicators |
Common Issues & FAQ
Q: What is a good F-Score? A: 8-9 indicates strong fundamentals. Studies show stocks with high F-Scores outperform those with low scores.
Q: Why is this useful for value investing? A: Low P/B stocks can be cheap for good or bad reasons. The F-Score helps distinguish quality value stocks from value traps.
Q: Is this suitable for all stocks? A: Best suited for value stocks (low P/B). Growth stocks may naturally have lower scores due to investment spending.
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