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Predicting Performance with Piotroski F Score

The Piotroski F-Score is a score given to each security based on its financial health. The score is between 0 and 9; 9 indicating the company is very financially healthy and 0 indicating the company is in financial distress and the possibility of default could be right around the corner.  This score is widely used across the financial industry to find good investments to buy or short. The securities are awarded one point per condition below:

  1. Most recent Yearly Net Income > 0
  2. Yearly Cash Flow from Operations > 0
  3. ROA is increasing
  4. Cash Flow from Operations > Net Income
  5. Long-term Debt is decreasing
  6. Current Ratio is increasing
  7. No new shares were issued
  8. Gross Margin is increasing
  9. Asset turnover is increasing

 

Open the Explorer tab and select Create new stock screener

In the editor of the stock screener include the criteria:

Market Cap > 100

F_Score T12M = 9

Now select the backtest Icon to see how stocks with an F score of 9 performed in the past.

The Result of the Back test is a 274% total return and 14.22% Annual Return since 2004

Now repeat the same steps but make the editor say:

Market Cap > 100

F_Score_T12M = 8

The result of that Backtest is a 191% Total Return and 11.35% Annual Return since 2004

Keep repeating the steps above for each f Score of 0-9

The Final Data is Displayed Below:

Score Annual Return
9 14.15%
8 11.34%
7 10.17%
6 9.16%
5 7.78%
4 6.61%
3 5.86%
S&P 500 4.23%
2 .65%
1 -2.58%
0 -.11%

The trend in this data makes Piotroski look like a complete genius. The higher the F _score the higher the average return of the stock.

Stocks with a Perfect F Score of 9 have produced a whopping 14% annual return versus a 4% return by the market since 2004.

On the other hand stocks with an F Score under 3 under perform the market on average since 2004.

 

In conclusion, due to the strong trend in the data and Real life results from users we can confidently say that the Piotroski F Score is a good predictor of price performance.

If you open any watchlist and the tear sheet is "Synopsis you can view the stocks Piotroski F Score

SGNT has an F Score of 6