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What is the Piotroski F-Score?

The Piotroski F-Score adds up nine simple tests of a company's financial statements, each worth one point when passed. It answers a narrow question well: did the company's finances get stronger or weaker over the last year?

Where it comes from

Joseph Piotroski, an accounting professor, published the score in 2000 in a study of companies trading at low prices relative to their book value. Within that group, he found that companies whose statements were improving went on to do markedly better than companies whose statements were deteriorating.

Its appeal is simplicity. Every test uses figures from two consecutive annual reports, and none needs a share price.

The nine tests

The tests cover profitability, leverage and liquidity, and operating efficiency. WylthIQ applies each one as follows.

  • Profitable: net income is positive relative to assets.
  • Positive cash flow: operating cash flow is above zero.
  • Profitability improving: return on assets is higher than a year earlier.
  • Profits backed by cash: operating cash flow exceeds net income.
  • Debt not rising: long-term debt as a share of assets has not increased.
  • Bills easier to pay: the current ratio is higher than a year earlier.
  • No new shares issued: the share count has not grown by more than 2%, a margin that allows for routine employee share grants.
  • Margins improving: gross margin is higher than a year earlier.
  • Assets working harder: revenue divided by assets is higher than a year earlier.

Reading the score

Scores run from 0 to 9. On WylthIQ, a company passing at least 78% of the tests it could be scored on — 7 or more of 9 — is rated strong, at least 44% — 4 or more of 9 — mixed, and anything below that weak.

When a company does not report a figure a test needs, that test is left out and the score is shown out of fewer than nine, rather than counted as a failure. A bank, which reports no current ratio, is scored out of eight.

What it does not tell you

The score is deliberately blunt, and its bluntness has costs.

  • It measures change, not level. An excellent business that had a slightly weaker year can score below a struggling one that improved a little.
  • Every test is pass or fail, so a margin up by a hair counts the same as one up by ten points.
  • It says nothing about valuation, and the original research concerned inexpensive, often small companies.
  • Several tests fit industrial companies better than banks and insurers.

Apply it

See the idea on real companies

Related explanations

What each figure is, how it is worked out, and where it misleads

Piotroski F-ScoreReturn on assetsCurrent ratioGross marginShare count

Common questions

What counts as a high F-Score?
Seven to nine describes finances that improved on most measures over the year, and zero to three finances that deteriorated on most. Because the score measures change, a high score is most informative alongside the level of profitability and debt it started from.
Why is a company scored out of eight rather than nine?
One of the nine tests needed a figure the company did not report. WylthIQ leaves that test out rather than counting it as failed, so the company is not marked down for a disclosure it never made.
Does the F-Score predict share prices?
The original research found an association within a specific group of companies over a specific period. The score itself is a description of two sets of financial statements, not a forecast of what a share price will do.

Educational information only — not investment advice. Every figure on a WylthIQ company page links to the filing it came from.