Piotroski F-Score methodology

The Piotroski-F-Score methodology serves as a supplement to the value investing strategy. Backtest analyzes of the available Finanzoo.de data using the Piotroski-F-Score showed an average improvement in annual performance of around 2% over a period of 20 years. The Piotroski Score avoids so-called “value traps”. Thus, it can be seen as a safeguard for the Finanzoo FScore.

 

[Translate to English:] piotroski f-score

Calculation & evaluation

The individual criteria of the Pitroski F-Score can be divided into the areas of profitability, liquidity and operational efficiency. The following key figures are taken into account:

Profitability:

1. Net income before special items> 0
2. Operating cash flow> 0
3. Return on Assets> previous year
4. Operating cash flow> Net income before special items

Debt, liquidity, financing:

5. Leverage <previous year
6. 3rd degree liquidity> previous year
7. Number of shares outstanding is not higher than in the previous year

Operational efficiency:

8. Gross margin> previous year
9. Capital turnover> previous year

The Piotroski F-Score is then formed from the sum of these 9 individual ratings. Whereby 1 point is awarded for fulfilling a criterion. So it can have a value between 0 and 9. 8 or 9 points are considered very good (buy), 0 and 1 point as very bad (sell). Finanzoo adds or subtracts the results as follows:

0 => -50 FScore points
1 => -40 FScore points
2 => -30 FScore points
3 => -20 FScore points
4 => 0 FScore points
5 => +5 FScore points
6 => +10 FScore points
7 => +15 FScore points
8 => +20 FScore points
9 => +25 FScore points

Use of the Piotroski F-Score in connection with the Finanzoo F Score:

Finanzoo.de continues to calculate the FScore as before based on the following criteria:

  1. Profitability
  2. Price-free-cash-flow ratio
  3. Equity ratio
  4. Price / earnings ratio
  5. Price-to-book ratio
  6. dividend

The maximum possible number of points is 100.

The number of points achieved by a company is then corrected by the Piotroski F score at the end of the calculation.

Example: IBM based on available data as of January 9, 2021.